In short The bank checks two things: do you have enough own funds, and can you carry the running costs even at high interest rates? You can check both with the calculator below in a minute.
The affordability calculator
Enter the purchase price, your own funds and your gross income. The calculator shows the costs per year, their share of your income and the highest price you can afford with your figures. Your entries stay in your browser.
Affordability calculator
- Mortgage
- Loan-to-value
- Imputed interest 5 %
- Maintenance and running costs 1 %
- Amortisation
- Costs per year
Highest affordable price
The banks’ rule of thumb, amounts in CHF. A bank calculates with its own rates.
The banks’ two rules
Rule 1: at least 20 % own funds
The bank lends you at most 80 % of the purchase price. You bring the rest. At least 10 % of the price must be hard equity: savings, securities, an advance on an inheritance or money from pillar 3a, for example. Money from the pension fund (2nd pillar) only counts for the second half.
Rule 2: at most one third of income
The costs of the home may not exceed one third of your gross income. The bank counts three items:
| Item | Bank’s assumption | At CHF 1 m price, CHF 800’000 mortgage |
|---|---|---|
| Interest | 5 % of the mortgage | CHF 40’000 |
| Upkeep and running costs | 1 % of the price | CHF 10’000 |
| Amortisation | part above two thirds within 15 years | CHF 8’889 |
| Total per year | CHF 58’889 |
With these costs you need a gross income of at least CHF 176’667. If two people earn, the bank adds both incomes.
How the bank calculates in detail
Imputed interest
The bank calculates with 5 % interest, even if you get the mortgage for 1.5 % today. That keeps the financing affordable when rates rise. Your real rate is usually much lower. The difference is your reserve.
Upkeep and running costs
A house needs upkeep: roof, heating, facade, kitchen. Fees, insurance and power for shared areas come on top. The bank uses 1 % of the purchase price per year. Some banks use 0.7 % to 0.8 % for new buildings.
Amortisation
A mortgage has two parts:
- First mortgage: up to two thirds of the purchase price. You do not have to pay it back.
- Second mortgage: the part above two thirds. You pay it back within 15 years, and by retirement at the latest.
At 80 % loan-to-value, the second mortgage is 13.3 % of the price. At CHF 1 million that is CHF 133’333, or CHF 8’889 a year. If you bring a third of the price or more yourself, there is no amortisation at all.
Direct or indirect
With direct amortisation, the mortgage falls every year. With indirect amortisation, you pay into pillar 3a and pledge the account to the bank. The mortgage stays the same, but you save taxes on the payments.
What to do if it is not enough
- Bring more own funds. Every extra franc lowers interest and amortisation.
- Use the pension fund. A withdrawal or a pledge raises your own funds, up to half of the 20 %. A withdrawal lowers your pension, though.
- Choose a cheaper place. Prices differ a lot between municipalities. The Kantello map shows prices, location and taxes at a glance.
- Think about taxes. A municipality with low taxes leaves more money for the mortgage. All cantons compared are in our guide to taxes.
From 2029: the imputed rental value goes
From 1 January 2029, owners no longer pay tax on an imputed rental value. At the same time, they can no longer deduct most mortgage interest for the home they live in. The banks’ affordability check does not change. Your tax bill does. More in the guide to the imputed rental value.
Frequently asked questions
How is affordability calculated?
Add up three items per year, namely 5 % interest on the mortgage, 1 % of the price for upkeep and running costs, and the amortisation. Divide the sum by your gross income. If the result is at most 33 %, the purchase counts as affordable.
Why do banks calculate with 5 % interest?
The imputed rate protects against rising interest rates. Your financing should stay affordable even if the mortgage becomes much more expensive in a few years. Some banks use 4.5 %.
How much equity do you need for a house in Switzerland?
At least 20 % of the purchase price. At least 10 % must be hard equity, money that does not come from the occupational pension fund. Purchase costs such as notary and land register fees come on top.
How much do I need to earn for a house costing CHF 1 million?
With CHF 200’000 of own funds, the bank calculates costs of about CHF 58’900 a year. To keep them below one third of income, you need a gross income of about CHF 177’000. More own funds lower that figure.
Sources
General information, not tax, legal or financial advice. Without guarantee.