Affordability is the central metric that Swiss banks apply to every mortgage financing. It determines what purchase price is actually realistic for a given household income \u2014 independent of the current interest rate environment. Anyone who can calculate affordability themselves goes into the property search with a clear view.<\/p>\n\n\n
Affordability is calculated from three components: imputed interest (typically 5 percent on the mortgage), amortization (1 percent annually on the second mortgage down to 65 percent loan-to-value), and ancillary costs (around 1 percent of the property value). The sum of these costs may not exceed one third of gross income.<\/p>\n\n\n
A couple with a gross income of CHF 180,000 per year wants to buy a house for CHF 1,200,000.<\/p>\n\n\n
Equity required: CHF 240,000 (20%)<\/p>\n\n\n
Mortgage: CHF 960,000<\/p>\n\n\n
Imputed interest (5%): CHF 48,000<\/p>\n\n\n
Amortization (1% on 2nd mortgage down to 65%): CHF 4,200 (on a CHF 180,000 second mortgage)<\/p>\n\n\n
Ancillary costs (1% of property value): CHF 12,000<\/p>\n\n\n
Total annual housing costs: approx. CHF 64,200<\/p>\n\n\n
Allowable (1\/3 of gross income): CHF 60,000<\/p>\n\n\n
\u2192 In this example, affordability is narrowly exceeded. Either higher equity, a lower purchase price, or a second income would improve the situation.<\/p>\n\n\n
Even at low market interest rates, banks calculate conservatively with 5 percent. This ensures that the mortgage remains affordable even if interest rates rise. This conservative assumption protects buyers from over-indebtedness in the long term.<\/p>\n\n\n
First, more equity: reduces the mortgage and thus the imputed interest expense. Second, a second income: a well-documented dual-earner situation expands the affordability range. Third, lower ancillary costs: an energy-efficiently renovated property with clearly documented operating costs is convincing to banks.<\/p>\n\n\n
Existing liabilities (leasing, consumer credit), irregular income components (bonuses, self-employment), and properties with significant renovation needs lead to deductions or higher equity requirements.<\/p>\n\n\n