How Much House Can You Afford? How to calculate your mortgage affordability in Switzerland

Find out how much house you can afford in Switzerland by understanding equity requirements, affordability rules, and bank calculations.

Buying a home is one of the biggest financial decisions you will ever make. Before you start looking at properties, it’s crucial to know the answer to a key question: How much house can you afford? In Switzerland, affordability is not just about how much you want to spend but also about how much banks are willing to lend. They follow clear rules and formulas to calculate whether your dream home fits within your financial means.

This article explains the most important principles behind affordability, how mortgage limits are set in Switzerland, and what documents you will need to prove your financial situation.

Why Do You Need to Calculate Affordability?

Affordability is central to mortgage lending in Switzerland. When banks grant loans, their main concern is minimizing financial risk. They need to be sure that you will be able to pay your mortgage not only today but also in the long term—even if interest rates rise.

That is why banks use conservative assumptions when running affordability checks. These calculations don’t reflect the low mortgage rates of recent years but instead use an imputed interest rate of around 5%. This “stress test” ensures that borrowers can handle higher costs if rates go up.

By calculating affordability before making an offer on a property, you avoid wasting time on homes that are out of reach. It also helps you make realistic financial decisions and prepare better for discussions with lenders.

Step 1: Determining Your Maximum Mortgage Amount

The first step is understanding how much banks will lend you. In Switzerland, the maximum loan is generally limited to 80% of the property’s value. That means you need to finance at least 20% with your own equity.

Rule of Thumb:

• The maximum purchase price of your property should not exceed five times your available equity.

For example, if you have CHF 200,000 in equity, your maximum purchase price would be around CHF 1,000,000. The remaining CHF 800,000 could be financed with a mortgage.

This rule ensures that buyers commit enough of their own capital to reduce the bank’s risk exposure.

Step 2: How Affordability Is Calculated

Once the mortgage amount is defined, banks evaluate whether you can afford the property in the long term. A simple benchmark is that housing costs must not exceed one-third of your gross annual income.

These costs are not based on your actual expenses but on standardized estimates, which include:

• Mortgage interest: calculated at 5% of the mortgage debt.
• Amortization: approximately 1% of the mortgage debt, representing repayments to gradually reduce it.
• Maintenance and ancillary costs: about 1% of the property’s value to cover repairs, upkeep, and operating costs.

Together, these factors provide a conservative estimate of annual housing costs. If these costs remain below one-third of your income, the property is considered affordable.

Example:

If you earn CHF 150,000 per year, your maximum annual housing costs should not exceed CHF 50,000. Based on the imputed interest rate and other assumptions, this defines your upper limit for the property purchase price.

Step 3: Required Documents for Affordability Checks

For an initial self-check, you only need rough numbers for your income and equity. But when applying for a mortgage, banks will require concrete documentation to verify your situation. Commonly required documents include:

• Proof of income: such as salary slips or, if self-employed, monthly or annual business statements.
• Evidence of equity: including bank account statements, securities portfolios, or pension fund documents if you plan to withdraw funds.
• Tax return: to provide a complete picture of your financial standing.

Preparing these in advance helps speed up the mortgage approval process and shows lenders that you are financially well organized.

Step 4: Why Affordability Rules Matter

It can be tempting to stretch your budget when looking for a home, but affordability rules serve as a safeguard. They protect borrowers from taking on too much debt and ensure that you can comfortably manage ongoing costs in the long run.

These rules are especially important in Switzerland, where property prices can be high compared to average incomes. By applying standardized calculations, banks make sure that both you and they are protected from financial strain.

How Much Can You Afford for a House – Key Facts

• At least 20% of the purchase price must be financed with your own equity.
• Your housing costs should not exceed one-third of your gross income.
• Affordability is calculated with imputed interest rates, not the actual rates.
• To apply for a mortgage, you will need to provide proof of income, evidence of equity, and tax returns.

Final Thoughts

Knowing how much house you can afford is the first step to becoming a homeowner in Switzerland. While your personal budget matters, the decision ultimately depends on affordability calculations set by banks. By understanding these principles and preparing the necessary documents, you can approach the property market with clarity and confidence.