Pay off your mortgage or invest? The Swiss calculation
March 3, 2025
2 min read
arvy's Teaser: One of the most common financial questions in Switzerland: "I have CHF 100,000 spare. Pay down the mortgage or invest?" The answer isn't as simple as either camp claims. Here's the honest calculation — with numbers, tax effects, and the answer to when each option actually wins.
The Basic Calculation
If your mortgage costs 1.8% and you expect 5–6% from the stock market, investing wins by 3–4% per year. But three factors complicate it: tax deductibility (mortgage interest is deductible — pay it off and you lose the deduction), wealth tax (lower debt = higher net wealth = more tax), and risk (the mortgage saving is guaranteed; investment returns aren't).
Scenario: CHF 100,000 available, CHF 600,000 mortgage at 1.8%
Option A — Pay down to CHF 500,000: Interest saving CHF 1,800/yr. Less deduction → ~CHF 600 more tax. Net benefit: ~CHF 1,200/year (guaranteed)
Option B — Invest CHF 100,000: Expected return at 5% = CHF 5,000/yr. Wealth tax ~CHF 200/yr. Net benefit: ~CHF 4,800/year (expected, not guaranteed)
Over 15 years: investing wins by ~CHF 54,000 at 5% return. In a poor scenario (2%): only ~CHF 3,000 advantage.
When Paying Off Wins
High mortgage rate (>3%), close to retirement (banks require 65% LTV by retirement), low risk tolerance (guaranteed savings > uncertain returns), or already well invested (diversification benefit).
When Investing Wins
Low mortgage rate (<2%), long time horizon (10+ years), high marginal tax rate (deduction is more valuable), or using indirect amortisation via 3a (keep deduction + get 3a tax benefit).
The Smart Solution: Both
Example: CHF 100,000
CHF 7,258 → Max out 3a (tax savings + indirect amortisation)
CHF 20,000 → PK buy-in (tax savings + higher pension)
CHF 30,000 → Partial mortgage amortisation (reduce interest + improve affordability)
CHF 42,742 → Invest via savings plan over 12 months
Tax-optimised, diversified, risk-aware. No "all or nothing."
"The question isn't 'mortgage or investing.' The question is: what's the smartest allocation for your situation?"
Let's look at your situation.
Mortgage, investing, 3a, PK buy-in — the best solution is individual. We'll help you find the allocation that works for you.
Disclaimer: This article is for general information and does not constitute investment or tax advice. Mortgage rates, tax effects, and expected returns are individual and canton-dependent. arvy is a FINMA-regulated asset manager.
