Mortgages after retirement: how Swiss banks do the maths

Retirement does not change your property – it changes your income, and that is exactly what the bank recalculates your mortgage against. Instead of salary, what counts is the state pension, the occupational pension and possibly an investment return: together often 40 to 60 per cent less. The rules stay the same: 5 per cent imputed interest, 1 per cent maintenance, no more than roughly a third of income. Do the sums five to ten years before retirement and every route is still open. Find out at renewal and the choice is much narrower.

Why does the bank check again at all?

Because affordability is not a one-off test at purchase but is reassessed at every renewal of the mortgage. While you are working, salary is the basis. Afterwards what counts is income that arrives regularly and permanently.

This surprises many people who have paid every instalment on time for twenty years. From the bank’s point of view it is not a vote of no confidence: under the Swiss Bankers Association’s self-regulation rules it cannot calculate any other way. The good news is that a running fixed-rate mortgage is not cancelled simply because you turn 65. The critical moment is the end of the term.

How does the bank calculate affordability?

The formula is the same as at purchase – only the income side shrinks. Three cost blocks are added up and compared with gross income.

Imputed interest: why 5 per cent?

The bank does not use the current mortgage rate but an imputed rate of around 5 per cent on the whole mortgage. This is a deliberate stress test, not a price: mortgages run for decades, and historically rates around 5 per cent were nothing unusual. Actual rates are currently far lower – the difference is your safety margin.

Maintenance and running costs: the 1 per cent rule

For maintenance, insurance, heating and other running costs banks apply a flat 1 per cent of the property value per year. In later life this item deserves particular attention: people who have lived in the same house for decades often have a boiler, a roof and a kitchen all reaching the end of their life at roughly the same time.

Amortisation: the second mortgage has to go

A Swiss mortgage is notionally split in two. The first mortgage runs up to two thirds of the lending value and need not be repaid. Anything above that is the second mortgage – and it must be amortised within 15 years, or by retirement at the latest.

This is not a formality. Postponing it leaves you facing a repayment obligation at 65 at the very moment your income drops.

Worked example: the same apartment, before and after retirement

A married couple owns an apartment with a lending value of CHF 1 000 000. The mortgage is CHF 660 000, just under two thirds – the second mortgage is already amortised, so there is no further amortisation obligation.

Item	Calculation	Amount per year
Imputed interest	5% of CHF 660 000	CHF 33 000
Maintenance and running costs	1% of CHF 1 000 000	CHF 10 000
Amortisation	none	CHF 0
Total imputed costs		CHF 43 000
Gross income required	CHF 43 000 ÷ 33%	approx. CHF 130 000

Before retirement, on a household income of CHF 150 000, the burden is around 29 per cent – comfortably within range.

After retirement the same calculation looks different. Suppose both draw the maximum state pension for a married couple plus occupational pensions, together around CHF 85 000 a year. The imputed costs stay at CHF 43 000 – so the burden rises to around 51 per cent. Affordability is clearly missed, even though nothing about the apartment or the mortgage has changed.

That jump is precisely why the calculation should be done early. Not because anything has gone wrong, but because the figures inevitably shift.

Lump sum or pension: which helps affordability?

Taking your occupational pension as a lump sum leaves you with a smaller ongoing pension. That improves your asset position but worsens exactly the figure the bank looks at – because a one-off withdrawal does not count as income.

Conversely, the capital can be used to repay part of the mortgage, which reduces the cost side. Which option works out better depends on the size of the pension, your fund’s conversion rate and your tax situation. Weighing the two against each other before you decide is one of the most effective levers available – particularly since many funds require notice of up to three years.

Pillar 3a savings, incidentally, count as hard equity and are therefore especially well suited to a partial repayment.

What if the sums no longer work?

There are more routes than selling, and they are not mutually exclusive.

1. Reduce the loan-to-value ratio. Every franc repaid lowers the imputed interest. In the example above, a partial repayment of CHF 200 000 would cut costs by CHF 10 000 a year.
2. Bring the children in. As co-borrowers, through a loan, or via an advance on their inheritance. This belongs in writing – the guide on passing on property explains how.
3. Let part of the property. A room or a separate flat, if the bank counts the rental income. That assumes the layout allows it.
4. Sell with a right of residence or usufruct. You give up ownership but stay living there. The right is entered in the land register.
5. Plan the move while it is still voluntary. Whether an age-friendly conversion is the better answer is the real underlying question – see Adapt or sell?.

A note on tax: the abolition of the imputed rental value was approved in the referendum of 28 September 2025, though the date it takes effect is not yet final. For retired people with a largely repaid home this changes a good deal – see the guide on the abolition of the imputed rental value.

When should you talk to the bank?

Earlier than most people think. An affordability calculation projected to your retirement date makes sense once retirement is roughly ten years away – ideally alongside a pension analysis that also models the lump-sum versus pension decision.

Ask explicitly for a calculation based on your future pension income, not your current salary. Only that figure tells you whether you need to act. And compare institutions: the parameters are similar but not identical – some banks use 4.5 rather than 5 per cent, or weight investment income more generously.

For an overview of all financing questions in later life, see the topic page Financing in later life.

Summary

• The bank reassesses affordability at every renewal – after retirement on pension income rather than salary.
• The maths stays the same: around 5 per cent imputed interest, 1 per cent maintenance, and no more than roughly a third of income.
• The second mortgage must be amortised by retirement; beyond that, affordability alone decides.
• A lump sum increases assets but reduces countable income – for affordability the pension is usually better.
• Room to manoeuvre is greatest five to ten years before retirement. After that the options get more expensive, not fewer.