What is a mortgage note?

Purchase

According to the Swiss Code of Obligations, a mortgage note is "a personal claim secured by a pledge of real estate".

What is the purpose of a mortgage note?

 

To purchase a property, you will most likely contact a financial institution to obtain a mortgage to finance your property. The mortgage note guarantees the financial institution that the funds loaned will be repaid and that the interest due will also be paid. If this is not the case, the note authorizes the financial institution to seize and sell the property if the repayment is not honoured.

 

How does a mortgage note work?

 

A mortgage note can exist in two forms: paper or virtual.

It is also called "paper value" and is not necessarily named in its paper form. However, it is important to ensure that it is kept in a safe place.

The second form appeared in 2012 and allows for avoiding the note's loss or destruction. It is however necessarily nominative. In all cases, the note must be registered in the land register and must be established by a notary.

 

What are the costs involved?

 

The creation of a mortgage note generates several types of costs, including stamp duty, land register fees, notary fees and VAT. Generally speaking, it is said that the cost of creating a mortgage note amounts to approximately 2% of the amount of the mortgage loan. To eliminate and reduce these costs, a cedula can either be transferred free of charge or resold by the seller of the property to the future buyer.

By Charline Demange, July 20, 2022

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