The End of the Rental Value: Should You Pay Off Your Mortgage?

What’s Changing in Practice

Today, owning a home comes with a tax cost: the government considers that you “earn” a notional rent by living in your home, and taxes you on it. In return, you can deduct your mortgage interest. In the future, there will be no more rental value, but no deduction either. A mortgage will therefore become less advantageous from a tax perspective.

So, should you pay off your mortgage?

Not necessarily—and definitely not in a rush! Here are the questions to ask yourself before deciding:

• Is my money working for me elsewhere ? If your savings generate a return higher than the cost of your mortgage, it’s better to keep them invested. Paying off your loan offers a guaranteed return… but it’s often modest.
• Do I have enough cash on hand? Money tied up in real estate is locked away. In the event of unexpected renovations, a financial setback, or a desire to help your children, you can’t just “withdraw” the bricks.
• Where am I in my life? As they approach retirement, some homeowners would be wise to reduce their debt. But be careful: once your mortgage balance is very low, it becomes difficult to take out a new one—banks are less enthusiastic.

Indirect amortization via Pillar 3a: a smart alternative

There’s a way to pay off your mortgage while still making your money work for you: indirect amortization through Pillar 3a. The principle is simple: rather than making direct annual payments to the bank, you contribute a sum to a Pillar 3a account or retirement savings plan—up to 7,258 francs per year for someone enrolled in a pension fund in 2026. This amount is fully deductible from your taxable income, resulting in immediate tax savings. The accumulated capital is then used to pay off the mortgage in a lump sum, typically at maturity or upon retirement.

With the elimination of the imputed rental value, this benefit becomes even more significant: even though mortgage interest will no longer be deductible, the 3a deduction remains fully valid. It is therefore a tax tool that survives the reform—and one that allows you to avoid tying up your cash unnecessarily while waiting for the loan to mature.

The Right Approach

The reform won’t take effect for a few years, and the question mainly arises when your mortgage matures. Until then, the best approach is to review your overall financial situation with your designated advisor at your bank before making a decision that will have a long-term impact on your assets.