Calculating your available equity
To purchase real estate, you typically need at least 20% equity. This includes savings on bank accounts, securities, balances in your pillar 3a account, and pension fund assets. At least 10% of the purchase price must come from "hard" equity such as savings deposits. The remaining 10% may be funded through pension fund assets.
Additionally, you should set aside reserves for ancillary purchase costs such as notary and land registry fees, which account for approximately 5% of the purchase price.
Analyzing your income and expenses
In addition to your equity, your income plays a decisive role in the affordability of a mortgage. Banks generally require that monthly housing costs do not exceed one third of your gross income.
Prepare a detailed overview of your income and expenses to gain a clear picture of your financial situation. Be sure to also consider potential future changes, such as starting a family or retirement.
Determining the maximum mortgage amount
The maximum mortgage you can obtain depends on both your available equity and affordability. Typically, banks finance up to 80% of the market value of a property. Of this, up to 65% may be in the form of a first mortgage, and 15% as a second mortgage, which must be amortized within 15 years.
For the purpose of affordability calculations, banks use a hypothetical interest rate of 5%, even if current mortgage rates are lower. Additionally, 1% of the market value is estimated for maintenance and ancillary costs.
For example: If the purchase price is CHF 1 million and you have CHF 200,000 in equity, the annual imputed housing costs would be CHF 58,889 (5% interest on CHF 800,000 mortgage + 1% maintenance + amortization). To qualify for affordable financing, you need a gross annual income of at least CHF 176,667.
You can use our mortgage calculator to assess the affordability of your desired property and to explore different scenarios. Our experts will be happy to advise you on home financing and will help you find the right mortgage with attractive rates. With a smart financing strategy, your dream of homeownership can become a reality.
Contact us anytime – we look forward to answering all your questions.
