Building loans in Switzerland: important information at a glance
A building loan can help you finance the construction or renovation of a house. How does the financing process work? How do building loans differ from traditional mortgages? Comparis answers key questions.
14.08.2025
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1. What is a building loan?
A building loan is a way of financing property. In Switzerland, building loans are primarily used for the construction or comprehensive renovation of properties.
Building loans are a form of a current account loan: in other words, the financial institution provides you with a credit limit – i.e. a maximum limit of the loan. You can use it flexibly and as required.
After the construction phase has been completed, the building loan is usually converted into a long-term mortgage (consolidation).
Good to know
A building loan is earmarked for a specific purpose. You may only use it for expenses directly related to the construction project. The lender checks each invoice submitted. The loan only covers expenses that are actually part of the construction or renovation project.
2. How do building loans work in Switzerland?
In the case of a building loan, you pay your down payment into the building account as equity after the contract has been concluded. You then use this for the first construction costs. You pay all the invoices for your construction project via the building account.
Once you have completely used up the paid-in equity, the building loan is used: you can pay all further invoices up to the agreed upper limit using the building loan.
The following table shows how a building loan is used. Example: home construction for 1,000,000 francs with a down payment of 200,000 francs. After the house has been built, the building loan of 800,000 francs is converted into a mortgage.
| Construction progress | Costs | Existing equity | Loan drawn | Explanation |
|---|---|---|---|---|
| Start of construction | CHF 200,000 | CHF 0 | ||
| Excavation of the foundation | CHF 100,000 | CHF 100,000 | CHF 0 | Construction progress paid for with equity |
| Shell construction | CHF 400,000 | CHF 0 | CHF 300,000 | Construction progress paid for with remaining equity plus part of the building loan |
| Interior fittings and completion | CHF 500,000 | CHF 0 | CHF 800,000 | Remaining construction progress until completion paid for with the building loan |
The requirements for a building loan are similar to the requirements for a mortgage. The most important conditions include:
Down payment as equity (usually 20% of the costs incurred)
Credit rating (your financial reliability)
Before a building loan is granted, the financial institution will ask for documents relating to your construction project. It will also check your financial situation. Only when all the requirements are met will the building loan be approved and the credit limit set.
3. What are the interest rates on a building loan?
Interest rates for building loans in Switzerland are usually variable. This means that they continuously adapt to the current market conditions during the construction phase. As a result, they can rise or fall during the term.
Good to know
You only have to pay interest on the part of the building loan that you actually use.
In addition to the interest on the building loan, there are also annual costs:
Loan commissions
Monitoring fees for the ongoing monitoring of the project
In addition, one-off or monthly fees may be charged for account management. The costs vary from one building loan provider to another.
4. What is the difference between a building loan and a mortgage?
A classic mortgage and a building loan differ in the following ways:
Time and purpose: you usually take out a classic mortgage to buy a finished property. A building loan, on the other hand, is intended for an ongoing construction or renovation project.
Payout: with a mortgage, the entire loan amount is usually available to you straight away. In the case of a building loan, the financial institution will gradually provide you with the money you need.
Interest and costs: mortgages usually have lower interest rates than building loans. However, with a mortgage, you pay interest on the entire mortgage amount from day one. With a building loan, interest is only incurred on the part that is actually used.
5. Combining a building loan and a mortgage: partial consolidation
In Switzerland, you have the option of combining a building loan and a mortgage. A common model for this is known as partial consolidation.
In the case of classic consolidation, the building loan is only converted into a mortgage after the construction or renovation has been completed. In the case of partial consolidation, tranches of the building loan are converted into a mortgage during the construction phase.
When is partial consolidation worthwhile?
Partial consolidation makes sense if you expect mortgage rates to increase during the construction phase. By converting individual tranches of the building loan into a mortgage at an early stage, you can secure low interest rates for these tranches. You can find the current mortgage rate forecast in our article.
You can also benefit from tax advantages when combining a building loan and a mortgage. This is because you can deduct mortgage interest from your taxable income, but usually not the interest on a building loan.
Not sure which form of financing best suits your construction or renovation project? Our mortgage partner HypoPlus can help you find the right financing solution.
This article was first published on 14.08.2025
