Mortgage Amortization: Direct, Indirect or Not at All?

Compare the ways to repay a Swiss mortgage and the effect of the Eigenmietwert reform.

6 min read · Mortgage & Property

Life situations: Buying or renting home

Swiss banks require you to reduce the second mortgage within 15 years. How you do it affects your taxes and flexibility.

Direct amortization

You pay money to the bank and the debt falls. Interest declines too, so your interest deduction shrinks over time. It is simple and lowers risk, but tax savings fall.

Indirect amortization

You pay into a pillar 3a account (pledged to the bank) while the mortgage stays unchanged. You deduct both the interest and the 3a contribution, and at the end the account repays the debt. The extra deduction can be worth thousands per year, but the money is locked and withdrawal triggers tax.

What changes with the reform

With the abolition of the Eigenmietwert, expected from 2028, mortgage interest will largely stop being deductible for the primary home. That shrinks the advantage of keeping a high debt, so direct amortization becomes more attractive. 3a contributions remain deductible regardless.

How to decide

• Would you invest the money instead? Compare with the after-tax mortgage cost.
• Do you value liquidity? Indirect locks the money.
• Have you reached your 3a limit anyway?

Run both options in the direct vs. indirect calculator and review them again once the reform details are final.