Mortgage certificates and mortgage liens explained in simple terms

When you take out credit, the lender (creditor) requires you (the debtor) to pledge something as security for the loan. In the case of a mortgage, this pledge consists of the financed property and is called a mortgage.

If you cannot pay the interest or the mandatory amortization, the lender has the right to sell the property and to settle the receivables from the proceeds; the lender therefore has the mortgage lien over your property. This is entered into the land register and recorded in a mortgage certificate. In essence, the certificate contains the following information:

• Details of the borrower (debtor)
• Details of the lender (creditor)
• Pledged amount
• Financial receivables (interest and amortization)
• The actual mortgage lien

The pledged amount is the maximum amount the borrower can borrow because of their financial circumstances (creditworthiness). The pledged amount must be at least as much as the mortgage amount. But it can also be more than the amount actually loaned. It’s actually sensible to consider the maximum possible pledged amount and not just cover the actual mortgage debt with the pledged amount. In some circumstances, this reserve can mean that no new mortgage certificate need be set up for future investments (e.g. renovations) or mortgage increases.

Under Art. 842, para. 1 of the Swiss Civil Code, a mortgage certificate is a “personal debt”. This means that debtors are liable not only for the pledged property but also for the total assets.

Paper mortgage certificate and registered mortgage certificate – what’s the difference?

There are two kinds of mortgage certificate. Both have the same function: guaranteeing the creditor’s receivables and the mortgage lien. Furthermore, a lien is entered into the land register for both types of mortgage certificate. But there are some differences, too. The paper mortgage certificate is a physical paper document, which is also a security similar to a share and known by the technical term document of title. It can be issued to the owner (bearer mortgage certificate) or in the name of a person (registered mortgage certificate). The relevant legislation can be found in Art. 860 ff of the Swiss Civil Code.

The registered mortgage certificate represents the lien in digital format; no additional security (document of title) is issued for this. Since their introduction in 2012, only registered mortgage certificates have been issued. These are always made out in the name of the creditor or the debtor. The relevant legislation can be found in Art. 857 of the Swiss Civil Code.

Risk of loss with paper mortgage certificates

The disadvantage of paper mortgage certificates compared to registered mortgage certificates is that they can be lost or damaged, with far-reaching effects: the land register office accepts amendments or cancellations of the lien only on presentation of the paper mortgage certificate. If it is lost, it is declared legally invalid and the debtor must have a new one issued – requiring all the associated time and effort, not to mention financial outlay.

Tip: have your paper mortgage certificate converted into a registered mortgage certificate.

When and how is a mortgage certificate deleted?

A mortgage certificate can (but does not have to) be deleted from the land register when the mortgage has been completely paid off. Legally valid deletion can be undertaken only by the land register office.

The procedure differs depending on the type:

• With paper mortgage certificates, the document of title must be submitted to the land register office. If the creditor consents to the deletion, it is voided and the paper mortgage certificate is deleted from the land register.
• With registered mortgage certificates, the creditor consents to the deletion and it is deleted from the land register.

Important note: if you have a paper mortgage certificate and you throw it away after the debt has been paid but before it has been deleted from the land register, that’s not the end of the matter. Quite the opposite: you must have it reissued before it can be legally deleted.

Why deletion isn’t necessarily the right choice

Even when you have amortized your mortgage in full, you can keep the mortgage certificate. As long as it isn’t deleted by express request, it retains its validity. This means you can use it again at a later date if required and take out a new mortgage for the pledged amount stipulated on the mortgage certificate. This saves you the fees for having it reissued, which amount to several thousand francs depending on the canton or municipality.

By the way, the pledged amount remains the same even after partial amortization. This creates some leeway for you to increase your loan in the future.

Example: you bought a house by taking out a mortgage for 400,000 francs. This amount is entered into the land register as a pledged amount and is recorded from then on in your mortgage certificate. You pay 100,000 francs back to your lender, and your mortgage now amounts to 300,000 francs. But the pledged amount remains at 400,000 francs. You could take out new financing of 100,000 francs at any time. Important note: to increase your mortgage, a new statutory credit check is still required by the creditor.

Tip: get expert advice

Mortgage liens are a complex legal field. You must appoint a lawyer or contact our mortgage experts if you have any questions.