Starting over in a new country is not easy, and financing your new life in Switzerland can be one of life’s biggest challenges. Switzerland, of course, welcomes thousands of expats each year. Each person has their own financial background and experience, but the rules and general costs of living typically remain the same.
While this is true, there is also somewhat of a lack of transparency which can make it difficult for newcomers to see what services are available. You only have to look to the tax or land buying systems to see this... So today, I wanted to shed some light on personal finance in Switzerland.
Switzerland is generally known for being efficient, organized, and expensive. The Swiss franc has been (and still is) strong enough to worry financial analysts if its value continues to rise against other currencies, Switzerland could enter a serious recession. But for the time being, a strong Swiss franc means that expats need to adjust to higher living costs.
Housing, groceries, and eating out are among the most expensive things in Switzerland. When Big Macs cost almost 13 francs and average rents for a 3-bedroom apartment cost 3'000 francs per month, it is not surprising to find out that Switzerland has two cities in the "Top 10 most expensive cities in the world" rankings. Utility bills range from 300 to 500 francs per month, and food is up to 30 per cent more expensive than in neighboring countries. Car ownership also works out to be costly, as in addition to import taxes you will have to budget for cantonal tax, insurance, parking permits, petrol, and a vignette (freeway tax).
Financing and Mortgage Options
For many expats, a higher cost of living comes with higher than average salaries. It may be feasible to buy property or a car in Switzerland with your new salary, but what are the best options when it comes to financing large purchases like these?
One would think that Swiss banks are the best solution, as choice is plentiful. But how well do banks fare when compared to private institutions who also offer credit? Generally speaking, banks fare very well, but it does not mean expats should not look at alternative sources of funding.
Swiss banks typically offer average rates of 2.3 per cent for fixed 10-year mortgages, while variable mortgages have rates of 2.85 per cent. However, you must note that banks split the total amount borrowed into "tranches" (or bands), one of which will incur substantially higher rates than the other. When this is taken into account, it might be worth looking at private credit as an alternative option.
Some private lenders offer perks like delaying your first repayment for 3 months at no extra cost, minimal bureaucracy, fast approval and transfers into your bank account (usually 24 hours/7 days), and the possibility of reducing your tax bill by deducting the interest paid on your loan from your annual taxable income.
Private lenders finance large sums of up to 250'000 francs and include payment protection in case you are unable to meet repayments, as well as total confidentiality and strict data protection procedures.
Of course, every case is different, but if you need to finance large purchases in Switzerland, do not dismiss private credit options, as they could be just what you are looking for. After all, balancing private credit options with a good salary can be the best way to finance your new life.
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