Is the mortgage passed on to heirs?

Yes, the mortgage is part of the estate. Heirs take over the rights and obligations associated with the property, including the mortgage debt. They can accept the estate (with the mortgage), renounce it, or request a benefit of inventory to evaluate assets and liabilities.

Can one heir take over the property and mortgage alone?

Yes, provided their affordability is sufficient to carry the mortgage according to bank criteria (charges max. 33% of gross income at the theoretical 5% rate). They will also need to compensate the other heirs for their share, either with their own funds or through mortgage refinancing.

What is joint ownership (indivision) and what are its risks?

Joint ownership (indivision) is the situation where multiple heirs own the property together without formal partition. Every decision (renovations, sale, mortgage) requires unanimity. Risks include decision-making deadlock, conflicts between heirs, and difficulty selling one's share. It is generally recommended to exit joint ownership as quickly as possible.

What taxes apply to inheriting real estate?

Taxes vary by canton and family relationship. Spouses and direct descendants are exempt in most cantons (except Vaud, Neuchatel, and Appenzell Innerrhoden for descendants). Other heirs are subject to inheritance tax at rates varying from 0% to over 40% depending on the canton and degree of kinship.

Inheritance and mortgage: inheriting real estate in Switzerland

Inheriting real estate in Switzerland means managing not only the assets but also the associated debts, including the mortgage. This guide helps you understand the mechanics of real estate inheritance and the options available to heirs.

Real estate succession in Switzerland

Upon the death of a property owner, the real estate and the associated mortgage become part of the estate. Swiss inheritance law (Civil Code, art. 457 ff.) determines who inherits and in what proportions, respecting the reserved portions (forced heirship).

The heirs form a community of heirs that owns all the deceased's assets and debts jointly. This is the starting point from which various options are available.

Taking over the mortgage as heirs

The mortgage does not disappear upon the borrower's death. Heirs who accept the estate automatically take over the obligations of the mortgage contract. The bank is typically informed of the death and contacts the heirs to formalize the situation.

Steps for takeover

Inform the bank: Present the death certificate and certificate of inheritance
Affordability assessment: The bank verifies that the heirs (or the heir taking over) can bear the charges
Contract transfer: The mortgage contract is transferred to the name(s) of the heir(s)
Land registry modification: The property is registered in the heirs' name(s)

If the deceased had taken out a death insurance policy linked to the mortgage (death risk coverage in a pillar 3a policy, for example), the insurance capital can be used to repay all or part of the mortgage.

Estate division

Real estate is rarely the only element in an estate. The division must take into account all assets and debts, including the mortgage.

Calculating the net property value

Net value = Market value of the property - Remaining mortgage

It is this net value that is distributed among the heirs. For example, for a property valued at CHF 1,200,000 with a mortgage of CHF 700,000, the net value is CHF 500,000.

Attribution to one heir

An heir can request the property be attributed to them, provided they compensate the other heirs. In our example, with three equal heirs, the retaining heir must pay CHF 166,667 to each of the other two (CHF 500,000 / 3 x 2 = CHF 333,334 total).

Financing this compensation may require a mortgage increase, subject to sufficient affordability. The new total mortgage would be CHF 1,033,334, representing an 86% LTV -- which generally exceeds the permitted maximum. Additional equity would then be needed.

Advance on inheritance

An advance on inheritance is a mechanism that allows transferring real estate during one's lifetime. It offers several advantages in the mortgage context:

Advance planning: The transfer is organized and prepared, avoiding conflicts between heirs
Tax optimization: Depending on the canton, a gift may be taxed less than inheritance
Mortgage continuity: The mortgage transfer can be negotiated in advance with the bank
Right of residence: The donor can reserve a right of residence or usufruct

Important: an advance on inheritance is reportable to the estate. This means the property value at the time of the gift will be taken into account during the final estate division, which can create imbalances if the property value has changed significantly.

Joint ownership (indivision): risks and solutions

When multiple heirs own the property together without partition, this is known as indivision (or undivided community of heirs). This situation is common but problematic:

Any decision regarding the property requires the unanimity of all co-heirs
Charges (mortgage interest, maintenance, taxes) must be shared among all
No co-heir can sell their share without the others' consent
In case of disagreement, only legal proceedings can force a partition

To exit indivision, co-heirs can agree on an amicable partition, sell the property and distribute the proceeds, or attribute the property to one of them with compensation.

Practical steps for heirs

Obtain the certificate of inheritance from the competent authority (justice of the peace or court)
Have the property appraised by an independent real estate expert
Contact the bank to clarify the mortgage situation and options
Decide the property's fate: attribution, sale, or temporary joint ownership
Formalize the partition by notarial deed and register the changes in the land registry
Adapt the mortgage: refinancing, amortization, or maintenance depending on the decision

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