Why do you need to calculate your affordability?
When it comes to granting mortgages, banks understandably want to minimize their risk. They therefore only approve mortgages for customers who have sufficient financial means, meaning that the bank wants to be certain that the customer will be able to pay the mortgage interest. To ensure affordability, banks do a specific set of calculations before granting a mortgage loan.
How to calculate the amount of your mortgage in Switzerland
The first step before performing the actual affordability calculation is to determine the maximum amount of your mortgage. In Switzerland, banks are allowed to loan up to 80% of the property's value, meaning that 20% of the purchase price must be financed by your own capital.
Therefore, the value of the property you want to purchase must not not exceed five times the available equity. The easiest way to calculate the amount of your mortgage is online with an affordability calculator. Click the banner below to access our free mortgage calculator:
Affordability calculation formula
The affordability calculation compares the expected ongoing costs of a property to your income. Banks use this to ensure that you can afford a property in the long term. A simple rule of thumb for calculating your affordability in Switzerland is that your housing costs must not exceed one-third of your gross income. Housing costs include various components, and the percentages indicated correspond to typical values used by banks:
- Mortgage interest (imputed interest rate of 5%)
- Amortization (approximately 1% of the mortgage debt)
- Maintenance and ancillary costs (approximately 1% of the property's value)
The easiest way to calculate the affordability of your mortgage and determine your maximum purchase price is to use an affordability calculator online. Click the banner below for our mortgage affordability calculator for Switzerland:
Required documents to calculate your affordability
For an initial assessment of your affordability using an online calculator, a self-disclosure is sufficient. However, when purchasing a property, you will eventually have your affordability checked by your bank. The following documents are required:
- Proof of income (such as a payslip, or monthly statements if self-employed)
- Evidence of your equity (such as a bank statement)
- Tax return
How much can I afford for a house – key facts
- In Switzerland, 20% of the purchase price of a property must be covered by equity.
- The ongoing costs of a property must not exceed one-third of your gross income.
- The easiest way to calculate your mortgage is to use an affordability calculator online.
