Mortgages for auctioned real estate: What is possible?

Swiss auctions are no longer just a cash game. Thanks to smart financing instruments, acquired properties can now be financed almost as comfortably as classic purchases, often with the bonus that the purchase price is already below market value. But time is of the essence: there are usually only 20 days between the auction and the payment of the purchase price. Those who know the right strategy secure ownership, interest rates, and tax advantages all at once.

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1 Specifics of a Foreclosure Auction

• Security deposit of 10% of the appraised value on the auction day, without it, no bidder paddle.
• Payment deadline for the remaining purchase price: 20 calendar days (slightly varying by canton).
• No reservation clauses: financing or withdrawal conditions are excluded.

“The time pressure is real, but it can be elegantly bridged with a bridge financing. After that, the regular mortgage follows at market conditions.”

2 Equity & Financing: Rules from 2025

With Basel III, FINMA is tightening the screws: At least 10% hard equity must be provided in the future, and the mortgage needs to be amortized to two-thirds of the loan-to-value within 15 years.

Financing Level	Max. Loan-to-Value	Typical Interest Rate (as of 2025)
1st Rank	66% - 70%	SARON + 0.9% to Fixed 5 Y.: 1.65%
2nd Rank	up to 80% (partially 85%)	Markup +0.5% - +1%
Bridge Financing	up to 100% purchase price	SARON + 1.5% (typical 3-12 months)

3 Step 1: Bridge Financing for the 20-Day Deadline

1. Short-term loan (SARON or variable mortgage) until land register entry.
2. Repayment from the definitive mortgage immediately after entry, no prepayment penalty if contractually stipulated.
3. Fees: 0.2% - 0.4% commitment fee, interest only for the days drawn.

4 Step 2: Structuring the Definitive Mortgage

4.1 Model Selection

• SARON: maximum flexibility for conversion or renovation phases.
• Fixed mortgage 5-10 Y: security at historically low interest rates.
• Tranching: combination of SARON + fixed for risk diversification.

4.2 Financing Base: Market Value vs. Auction Price

Many institutions use the appraised value rather than the hammer price. If the auction price is 20% lower, this effectively increases your loan-to-value ratio and reduces the required equity contribution, serving as a hidden yield booster.

What if the bank only recognizes the auction price?

Then a second appraisal or going to an insurance bank is worthwhile. Many regional banks honor the full market value as long as there is an official appraisal.

5 Rank Transfer: Reorganizing the Borrower's Mortgages

If an old mortgage is registered in the 1st rank, you have the option to choose:

• Takeover of the terms (if attractive).
• Redemption and new establishment, usually the buyer bears the fees.

The bank will review your affordability (maximum 35% of gross income for interest, amortization, ancillary costs) just as with any change of debtor.

6 Taxes: Optimize Cleverly

• Debt interest is fully deductible, as long as it does not exceed property income.
• Capital gains tax is paid by the selling debtor, not the buyer.
• Property transfer tax is waived in some cantons for foreclosure sales, e.g., Zurich, Zug, St. Gallen.
• Renovation costs are tax-deductible within five years after purchase, if they maintain value.

7 Practical Example: From Auction to Dream Return

In February 2025, René acquired a multi-family house in Lucerne for CHF 2.4 million (appraised value CHF 3.0 million). He bridges the payment with a SARON bridge loan (3 months, 3.1% interest). After the land register entry, he takes out a fixed mortgage of CHF 1.8 million at 1.65% and a SARON tranche of CHF 300,000. His effective loan-to-value ratio is 70%, with his equity being CHF 720,000. Thanks to the lower auction price, the net return increases by 3.4% p.a. compared to a purchase at market value.

8 Financing Checklist

1. Study the payment plan from the enforcement office (20-day deadline).
2. Meet with the bank before the auction, secure a written bridge financing promise.
3. Provide security deposit (10%) in a liquidity account.
4. Obtain an official appraisal report.
5. After the auction: finalize & submit the mortgage contract.
6. Declare tax deductions in the next tax return.

9 FAQ

Can I finance the deposit?

Yes, through a Lombard loan on securities or a short-term personal loan. The bank accepts this as long as the source of equity is clearly documented.

How much equity do I really need minimum?

10% hard equity (not from pension funds) plus purchase ancillary costs, anything beyond that can come from the 2nd pillar or early withdrawal from the 3rd pillar.

Are there special offers from insurance companies?

Some life insurers offer policy-backed mortgages up to a 65% loan-to-value ratio, attractive if you are building up pension simultaneously.

10 Conclusion: Financing, not an obstacle course, but an advantage

With the right combination of bridge financing, slim loan-to-value, and tax optimization, the perceived hurdle of the 20-day deadline becomes a springboard for above-average returns. Know the rules of the game, talk early with your bank, and turn the hammer strike at the foreclosure auction into a secure interest advantage for decades.