Mortgages for your property.

The ratio of costs to income is summarized in Swiss mortgage lending with the term affordability. Both costs and income can be calculated for one month or for an entire year. Mortgage interest, ancillary costs, and amortization payments are counted as costs in the affordability calculation for owner-occupied residential property.

Affordability is usually expressed as a percentage and is also known as the affordability ratio. This is particularly high when income is low but costs are high. A principle that may seem somewhat counterintuitive at first glance. The higher the affordability ratio, the more difficult it becomes for the buyer to bear the mortgage. Since 2014, the Swiss Banking Guidelines have required that affordability for owner-occupied residential property must be based on “sustainable income and expense components.”

If the mortgage interest rate is concluded during a period of particularly low interest rates, increases in this rate must be expected in the future. The affordability ratio must be recalculated when creditworthiness-relevant events have occurred. To estimate the trajectory of income over the coming years, information such as possible job changes or family planning must also be included in the calculation. Most providers set the maximum permitted value of the affordability ratio for owner-occupied residential property at approximately 33%. Annual costs in Switzerland should therefore not exceed one-third of annual income. However, the exact calculation may differ from provider to provider: the calculation is based on either gross or net income, and income from assets, pensions, and secondary income may be credited differently. According to the guidelines, secondary income is only to be credited in the case of joint and several liability.