Indirect amortisation in Switzerland: a preferred investment strategy
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When purchasing real estate in Switzerland, particularly in the luxury property market, the method of repaying your mortgage is a strategic decision. Among the available options, indirect amortisation stands out for its tax and wealth management benefits. FGP Swiss & Alps guides you in understanding and leveraging this mechanism as part of a long-term value strategy for your property.
What is indirect amortisation?
Unlike direct amortisation, which involves gradually repaying the mortgage principal, indirect amortisation follows a different approach: you do not repay the loan directly, but instead pay equivalent amounts into a pension product (often a tied 3rd pillar, or pillar 3a).
These contributions serve as collateral for the lender, while allowing the buyer to continue benefiting from the tax deductibility of mortgage interest, since the loan principal does not decrease immediately.
Why choose indirect amortisation for a luxury property?
Indirect amortisation is particularly suited to high-end acquisitions where tax optimisation and wealth planning are crucial:
- Tax advantage: mortgage interest remains high and therefore deductible from taxable income – a significant asset in a country where taxation is calculated on the basis of net income.
- Pension optimisation: payments into pillar 3a help you prepare for retirement while also securing your financing.
- Flexibility: the capital remains available in the long term, which can be strategic if you are considering resale or financial restructuring.
- Return on invested capital: depending on the pension product chosen, your capital can grow throughout the mortgage term.
Who is indirect amortisation for?
Indirect amortisation is designed for:
- Wealthy investors looking to reduce their tax burden.
- Swiss or international buyers purchasing a luxury primary or secondary residence in Switzerland.
- Individuals with structured wealth planning, wishing to integrate their property purchase into a broader long-term pension and investment strategy.
Indirect amortisation: how it works in practice
Let’s take an example:
- Purchase of a chalet worth CHF 5 million
- Mortgage of CHF 3.5 million
- Instead of directly repaying CHF 500,000 over 10 years, you pay the equivalent into a tied pillar 3a account.
- This capital is locked until retirement age or the final repayment, but remains tax-deductible throughout the entire period.
- At the same time, you continue to deduct interest on the CHF 3.5 million, instead of seeing it gradually decrease.
Differences between direct and indirect amortisation
The choice between direct and indirect amortisation depends on your financial situation, your long-term goals, and your tax strategy. Below is a comparison table to help you understand the key differences between these two options and guide you in making the right choice according to your buyer profile and wealth priorities.
| Criterion | Direct amortisation | Indirect amortisation |
| Repayment of principal | Yes (progressive) | No (principal remains constant) |
| Tax-deductible interest | Decreases over time | Remains stable for longer |
| Linked product | None | Pillar 3a pension account |
| Availability of paid-in capital | No (integrated into the loan) | Yes, in the long term (depending on pillar 3a conditions) |
| Recommended for | Cautious profiles | High-net-worth buyers focused on tax optimisation |
Is it allowed for all types of buyers?
Yes, both Swiss nationals and non-residents authorised to purchase property may opt for indirect amortisation, provided they comply with cantonal regulations and the criteria set by lending institutions.
At FGP Swiss & Alps, we connect you with the finest tax experts and banking partners to optimise the financial structure of your luxury acquisition.
In summary: key takeaways
- Indirect amortisation is a smart way to preserve the tax deductibility of interest.
- It allows you to build capital in a pillar 3a account while securing your mortgage.
- This solution is tailored to premium projects, where every tax and wealth lever matters.
- It requires personalised planning to fully benefit from its advantages.
Planning to buy property in Switzerland?
Whether it’s a luxury chalet, an apartment with a view, or a contemporary villa, FGP Swiss & Alps advises you on the best amortisation strategy. Contact our experts for a confidential and tailor-made consultation.
FAQ on indirect amortisation in Switzerland
What is the difference between direct and indirect amortisation?
Direct amortisation gradually reduces the loan principal, which lowers the interest payable over time.
Indirect amortisation keeps the debt constant and requires contributions into a tied pillar 3a account, preserving the tax deductibility of interest while building parallel wealth.
What are the tax benefits of indirect amortisation?
With indirect amortisation, mortgage interest remains higher and deductible for a longer period. In addition, pillar 3a contributions are also tax-deductible annually, optimising the overall tax burden.
Is indirect amortisation suitable for all buyers?
It is primarily intended for high-net-worth investors and buyers of premium properties, whether Swiss or authorised foreign buyers. It is especially suitable for those with a structured wealth strategy looking to optimise taxation.
Can direct and indirect amortisation be combined?
Yes. Some banks offer a mixed amortisation model, where part of the mortgage is repaid directly and the other part indirectly via a pillar 3a account. This provides a balance between security and tax optimisation.
What happens to the capital paid into the tied pillar 3a account?
The amounts remain locked until retirement age or the final repayment of the mortgage. At that point, they are used to reduce the debt in one go. In the meantime, they may generate a financial return, depending on the product chosen.
What are the risks of indirect amortisation?
The main risk relates to the performance of the pillar 3a product: if returns are low, the wealth advantage will be limited. In addition, the debt remains constant until final repayment, which may be restrictive in the event of reduced income or an early resale.
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