Amortisation Calculator — Direct vs. Indirect (Pillar 3a)

What is Amortisation?

In Switzerland, the 2nd mortgage (the portion above 66.7% of the lending value) must be repaid within 15 years. This repayment is called amortisation. There are two options: direct and indirect amortisation.

Direct Amortisation

With direct amortisation, you regularly repay part of the mortgage to the bank. The outstanding debt decreases, and so does the interest burden. The disadvantage: as the debt decreases, the mortgage interest deduction on your tax return also decreases.

Indirect Amortisation via Pillar 3a

With indirect amortisation, instead of paying the bank, you pay into a pillar 3a account. The mortgage remains unchanged, and the 3a balance is pledged to the bank as security. At the end of the term (or at retirement), you dissolve the 3a account and repay the mortgage in one step.

The advantage: you benefit from a double tax deduction — mortgage interest remains fully deductible, and the 3a contribution is additionally tax deductible. The 3a portfolio also earns a return.

When Does Indirect Amortisation Pay Off?

Indirect amortisation pays off in most cases, especially when:

• You have a high marginal tax rate (above 30%)
• You use a securities 3a account (e.g. VIAC, Finpension) with a higher return
• The mortgage interest rate is low (below 3%)

The greater the difference between the 3a return and the mortgage interest rate, the greater the advantage of indirect amortisation.

Pillar 3a: Limits and Tax Deduction

Employees can pay in a maximum of CHF 7,258 per year (as of 2025/2026) into pillar 3a. This amount is fully deductible from taxable income — regardless of the canton. The tax saving depends on the individual marginal tax rate and is typically CHF 2,000–3,000 per year.