Financing confirmation: how to check prospective buyers
A property sale rarely falls through because of the price. It falls through due to financing. Comparis shows how to vet prospective buyers before giving your approval.
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1. What is a financing confirmation?
A financing confirmation is a written declaration from a bank. It states that the bank is prepared to finance the purchase of your property. It is often required as proof when selling a property.
Nevertheless, a financing confirmation is not a guarantee. The lender can withdraw its commitment. This happens, for example, if:
the credit standing of the buyer changes
the property valuation is below the agreed price
This is how you can spot a weak confirmation
Pay close attention to the content. Phrases such as «in principle willing» or «subject to final review» are the normal case and not a warning sign. Things become critical when it comes to these points:
The confirmation states no specific property, but only a maximum amount.
The confirmed amount is under your purchase price.
The following is missing: Date of issue or it has expired.
Good to know: Financing confirmations are usually time-limited. If the sale is delayed, ask for an updated version before the contract is notarised.
2. Binding or non-binding: the difference
A letter of intent from the bank is not a promise of payment. For you as a seller, this is the most important difference in the whole process.
The following table shows you the difference between a non-binding financing confirmation and a binding promise of payment.
| Financing confirmation | Irrevocable promise of payment | |
|---|---|---|
| Legal effect | no obligation | the bank undertakes to make the payment |
| Timing | early, often even before the viewing | shortly before notarisation |
| Prerequisite | Preliminary review of the documents | signed mortgage agreement |
| Right of withdrawal possible | yes | no |
| Significance for you | guide value | security |
The bank issues the irrevocable promise of payment as soon as the mortgage agreement is signed. In doing so, it undertakes to transfer the purchase price to the notary’s account. In many cantons, it is a prerequisite for the public certification.
Comparis tip: Request both, at different times. The financing confirmation before you take the property off the market. The promise to pay before you confirm the notarisation appointment.
3. Affordability and equity when buying a home explained in simple terms
Banks check two things: whether the buyer has enough equity and whether they can afford the ongoing costs on a permanent basis If you understand these two factors, you can often spot a weak offer during the conversation itself.
Equity: at least 20%
For owner-occupied residential property, banks finance a maximum of 80% of the value. The buyer must provide the rest themselves. At least half of this (10%) must not come from the pension fund.
The buyer provides proof to their bank: with account statements, the statement from the securities accounts or a confirmation from the pension fund. In the case of a gift or an advance on an inheritance, written confirmation is also required.
Affordability: one third of the income
The rule of thumb: interest, ancillary costs and amortisation together may not exceed no more than one third of the gross income The calculation is not based on the current interest rate, but on an imputed rate of 5%. If the affordability is more than 33%, many banks will refuse.
Example: a property for one million francs.
| Position | Calculation | Amount per year |
|---|---|---|
| Imputed interest on a mortgage of 800,000 francs | 5% of 800,000 francs | 40,000 francs |
| Ancillary costs and maintenance | 1% of 1,000,000 francs | 10,000 francs |
| Amortisation of the second mortgage | (800,000 − 666,667) ÷ 15 years | 8,900 francs |
| Total | 40,000 + 10,000 + 8,900 | 58,900 francs |
This means that the buyer needs a gross income of approximately 180,000 francs. And 200,000 francs in own funds.
How much home can you afford?
Calculate in just a few seconds whether affordability and the loan-to-value ratio work out for your dream property.
4. What questions can you ask before selling your property?
You can ask whatever you like. Prospective buyers may refuse to answer. From this, you can and should draw your own conclusions draw your own conclusions.
These five questions are common and meaningful:
Is the financing, and with which bank?
How high are the equity, and where do they come from?
Does the purchase depend on the sale of another property?
By when can you provide a promise of payment?
When would you like to have the purchase agreement notarised?
The third question is the most important. Whoever has to sell their own property first is dependent on a second sale over which they have no control.
What you should avoid
Do not request salary statements or debt collection statements from everyone attending a viewing. Only request documents once a serious offer has been made. After the sale, do not keep any sensitive documents belonging to the buyers do not after the sale.
Comparis tip: Ask for the mortgage approval in the original to be sent. If in doubt, call the issuing bank and ask them to confirm the authenticity.
5. When should you reject the offer?
An offer without financing is worthless. These signs suggest you should not accept the offer:
The mortgage approval does not arrive despite being requested.
The purchase depends on the sale of another property without a fixed date.
The buyer is pushing for a quick reservation, but is delaying the documents.
The price offered is significantly above the market value. The buyer must make up the difference with their own funds.
The last point is underestimated. This is often precisely why an overbidding offer fails.
Good to know: A reservation agreement with a down payment does not protect you. Contracts relating to land and their preliminary contracts must be notarised (Art. 216 CO). A privately written reservation agreement is null and void. For this reason, the buyer can reclaim the down payment. Your only real safeguard is to carry out checks before giving your commitment.
6. Checklist: Check prospective buyers
If you want to sell your property, it is best to check in this order:
| Step | When |
|---|---|
| Request mortgage approval | before the offer is accepted |
| Check the property, amount and date | immediately upon receipt |
| Ask whether there are any dependencies on other sales | in the first meeting |
| Have the bank confirm authenticity | if you are unsure |
| Request an irrevocable promise of payment | before the notarisation appointment |
Comparis tip: Don’t want to carry out the check yourself? Property experts from the Comparis network are familiar with the usual wording used by banks and can spot a weak commitment immediately.
7. FAQs on checking prospective buyers
No. Financing confirmation is a bank’s commitment in principle and not a contract. The bank can revoke it, for example, after a lower valuation of the property. It only becomes binding with the irrevocable promise of payment.
It is usually time-limited. Usual periods are a few weeks to a few months. Check the date and, if the sales process is likely to be lengthy, request an up-to-date version.
You are allowed to ask. There is no entitlement to this. Only request it when you have a concrete offer and not from all interested parties. Destroy the extract from the debt collection register after the sale.
An binding declaration by the bank, to transfer the purchase price. It is issued as soon as the mortgage agreement has been signed is. In many cantons, it is a prerequisite for notarisation.
Only to a limited extent. A private written reservation agreement is invalid, the deposit can be reclaimed. The reservation only becomes binding with notarisation.
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