Should I sort out the financing first or look for a property?

Why you should check your finances before you start looking

The bottleneck of affordability

The main reason why you should sort out your financing before you start looking is because of the strict Swiss regulations. It is not enough to have the necessary equity. The bank checks what is known as affordability.

This is calculated using an imputed interest rate of 5 per cent (plus ancillary costs and amortisation). These theoretical costs must not exceed one third of your gross income.

Many people underestimate this hurdle. If you first view a house for 1.5 million Swiss francs and fall in love with it, only to find out that your income is only enough for 1.2 million according to the bank, the disappointment is huge. By clarifying the financing early on, you define your maximum purchase price ("price tag"). Only those who know this can search specifically . Anyone who tries to search without a budget limit wastes time – their own and that of the estate agent. Therefore: first clarify the financing, then search.

Competitive advantage in a "seller's market"

The Swiss property market is a seller's market. There are often dozens of interested parties for every attractive property. Sellers and estate agents want certainty. They prefer interested parties who can credibly prove that they can afford the property.

If you can present a financing certificate at the first viewing because you have clarified your financing in advance, you signal professionalism. While other interested parties still have to run to the bank to clarify their financing, you are already one step ahead. In a fast-moving market, this time advantage is often decisive in winning the bid. Those who only start to clarify their financing after the viewing often arrive too late.

Efficiency and emotional protection

Buying property is emotional. Falling in love with a house you cannot afford hurts. By sorting out your financing in advance, you protect yourself from this heartbreak. You filter search profiles realistically.

You also save time. Why view properties that are out of reach? If you sort out your financing first, you can focus your energy on achievable dreams. You learn to structure your own funds (pension fund, savings account, advance inheritance) correctly. This is also part of clarifying your financing: knowing how much "hard" and "soft" equity is available.

The two-step process of clarifying your financing

It is important to understand that "clarifying financing" takes place in two phases:

• General feasibility (before the search): Here, the bank checks your income and assets. The result is a certificate of your maximum purchasing power. This is the step we are referring to here: you need to clarify this general financing.
• Property-specific financing (after the search): Once you have found a specific property, the bank checks the value of that specific property.

The mistake many people make is to believe that financing can only be clarified once a specific property has been found. This is only true for phase 2. Phase 1 is mandatory and must be completed in advance. You can and must clarify your basic financing before requesting an exposé.

Special considerations for newcomers

Are you new to Switzerland? Then it is even more important that you clarify your financing before you start your search.

• Residence status: Banks check differently depending on the permit (B or C).
• Withholding tax: Calculating attachable income is more complex.
• Origin of own funds: Money from abroad must be checked for compliance.

To avoid delays, as an expat you should clarify your financing immediately upon arrival. An estate agent will often not even invite you to view a property if they realise that you are not familiar with the local financing rules. By proactively clarifying your financing, you show that you are a serious market participant.

Strategy: How do I proceed?

How should you go about clarifying your financing?

• Gather documents: payslips, tax returns, pension fund statements, proof of assets.
• Consultation appointment: Make appointments with your bank and possibly a second bank or mortgage broker to clarify the financing.
• Certificate: Request a written financing certificate or proof of feasibility.
• Search: Only now should you start actively searching.

By choosing this approach and sorting out the financing first, you will appear confident. You know exactly: "I can bid up to 1.2 million." This gives you security in negotiations. If, on the other hand, you still have to sort out your financing during the price negotiations, you will be in a weak position.

Risks if you disregard the order

What happens if you refuse to clarify the financing in advance?

• Loss of reputation: Estate agents take note of "tourists" who view properties but cannot buy.
• Cost risk: If you sign a reservation agreement prematurely and then have to sort out the financing, which then falls through, your deposit is often lost.
• Frustration: You find the perfect house, but by the time you get approval from the bank, it has been sold.

So there is no logical argument against sorting out the financing first. It is a free step (consultation is usually free) that gives you an invaluable knowledge advantage.

Conclusion

The answer is clear: you should definitely sort out your financing before you actively start looking for property. The Swiss market does not forgive procrastination. Those who know their financial limits and can prove them have a head start in the race for the best properties. Sorting out your financing early on protects you from emotional disappointment and greatly strengthens your negotiating position.

Don't view sorting out your financing as a tedious bureaucratic process, but as the foundation of your success. Only those who know how much they can spend can actually buy. So take the first step today: organise your documents and make an appointment to sort out your financing. Only then can the adventure of buying a house begin.

Take advantage of Loft's expertise to have your starting position professionally analysed and start the process efficiently.

Glossary

• Clarify financing: The process of having your creditworthiness and maximum budget checked by a bank, ideally before you start looking for property.
• Financing certificate: Written proof from the bank that it is prepared to finance a purchase up to a certain amount. This is extremely helpful when clarifying financing with sellers.
• Affordability: The golden rule of banks: your calculated housing costs must not exceed 33% of your gross income. This is a key point when clarifying your financing.
• Equity: The funds you contribute yourself (at least 20%). Structuring these funds is part of clarifying your financing.
• Imputed interest rate: A theoretical interest rate (usually 5%) that banks use to test your long-term solvency when clarifying your financing.