Affordability and equity: the two numbers that decide it
Whether a bank lends comes down to two calculations almost every time: twenty per cent equity, and a theoretical cost burden of roughly a third of gross income. Both are stricter than most people expect.
Equity: twenty per cent, ten of it “hard”
For owner-occupied property, banks generally require at least twenty per cent of the purchase price in equity. Half of that, ten per cent of the price, has to come from somewhere other than second-pillar pension assets: savings, pillar 3a, an advance on an inheritance, a gift, or securities. The rule sits in the Bankers Association’s self-regulation, and practically every institution applies it.
The sum uses an interest rate you do not pay
The bank works not with your actual mortgage rate but with a theoretical one, customarily five per cent. To that it adds roughly one per cent of the price for maintenance and running costs, plus amortisation. Those three together should stay under about a third of your gross income. That is where most financings fail, not on the deposit.
- Theoretical rate
- Usually 5 % p.a.
- Maintenance and costs
- About 1 % of the price per year
- Target
- At most about ⅓ of gross income
- Amortisation
- Down to two thirds of the lending value, generally within 15 years
The bank’s lending value governs, not the purchase price. If the valuation comes in below the agreed price, you must cover the difference entirely from your own funds. That is the commonest reason a promised financing collapses days before the notary appointment.
These articles set out Swiss law in general terms and are not a substitute for legal advice on an individual case. Cantonal rules differ. In a dispute, contact the rent conciliation authority or a lawyer.