How to repay your mortgage

In Switzerland, repaying a mortgage does not always follow a logic of fully eliminating debt.

Unlike in other countries, it is common to maintain part of a mortgage over the long term, for both financial, tax and wealth planning reasons.

The question is therefore not only whether to repay, but how to define a strategy aligned with your overall situation.

The different types of amortisation

Mortgage repayment generally follows two main approaches.

Direct amortisation

Direct amortisation consists of gradually repaying the borrowed capital.

• the outstanding debt decreases over time,

• interest costs are reduced accordingly.

This approach helps lower overall debt levels and long-term financial commitments.

Indirect amortisation

Indirect amortisation consists of repaying the mortgage through savings, typically via:

• pillar 3a,

• or, in some cases, other pension solutions.

In this case:

• the debt remains unchanged during the term,

• the accumulated savings are used to repay the loan at a later stage.

This approach may offer tax advantages, depending on the situation.

Why repay (or not repay)?

Repaying a mortgage is not a one-size-fits-all decision and depends on several factors.

Reducing debt

Repayment allows you to:

• decrease your outstanding debt,

• reduce interest expenses.

This strengthens your financial security.

Optimising taxation

Mortgage interest is often tax-deductible, meaning that maintaining debt may:

• reduce taxable income,

• optimise your tax situation.

Repayment therefore has tax implications that need to be anticipated.

Preserving liquidity

Not repaying allows you to:

• maintain available liquidity,

• invest in other opportunities.

Capital can be used to diversify your wealth.

Key elements to consider

Choosing the right strategy depends on your overall situation.

Your horizon and objectives

• retirement planning,

• wealth transfer,

• personal and family projects.

Your financial situation

• income level,

• ability to sustain borrowing costs,

• existing level of debt.

The economic environment

• interest rate levels,

• tax environment,

• property market conditions.

A strategy that evolves over time

Mortgage repayment is not fixed.

It can evolve depending on:

• your personal circumstances,

• market conditions,

• your priorities.

A flexible approach helps ensure that your financing remains aligned with your long-term objectives.

Integrating repayment into your overall strategy

Mortgage repayment should be part of a broader reflection, including:

• your wealth strategy,

• your pension planning,

• your tax situation.

The objective is to strike a balance between:

• financial security,

• tax efficiency,

• and wealth optimisation.