How is mortgage affordability calculated?

The bank uses an imputed interest rate of approx. 5%, plus 1% ancillary costs and 1% amortisation. These costs may amount to no more than one third of gross income.

What income do I need for a mortgage of CHF 1 million?

For a mortgage of CHF 1 million, the imputed costs are around CHF 70'000 per year. You therefore need a gross income of at least CHF 210'000.

Is the income of both partners counted for affordability?

Yes, for married couples the entire household income is taken into account. For unmarried cohabiting couples, most banks also accept both incomes.

What can I do if affordability is just short?

Possible levers: contribute more equity, pledge Pillar 3a assets, take an advance on inheritance, or buy a less expensive property. Some banks also assess based on actual income rather than imputed values.

Calculating Mortgage Affordability: The 33% Rule & 5% Interest

Banks calculate affordability using an imputed interest rate of around 5% (some cantonal banks use 4.5%) — not the current market rate. The imputed housing costs from mortgage interest (5%), amortization (1%) and incidental costs (1% of the purchase price) may amount to a maximum of 33% of gross income. For a property of CHF 1,000,000 with 20% equity, this works out to around CHF 58,000 in imputed housing costs per year — which requires a gross household income of about CHF 176,000. The requirement comes from the FINMA-recognized SBVg self-regulation (in force since 1 January 2025).

What is the 33% rule for affordability?

The imputed housing costs may amount to a maximum of 33% of gross income (before taxes and social security contributions). Conversely, gross income must be at least three times the annual imputed housing costs. According to the guide, this threshold is the banks' central criterion and the most common reason for rejection. It is cited in the SBVg guidelines as the limit for responsible lending.

Why do banks calculate with a 5% imputed interest rate?

The imputed interest rate of 4.5–5% is a long-term stress interest rate, not the current market rate. It ensures that the mortgage remains affordable even if interest rates rise. Historically, the average rate for Swiss mortgages over 30 years was around 3.5–4%; the imputed rate therefore includes a safety buffer. It was introduced as a FINMA guideline after the real estate crisis of the 1990s.

Which three components make up housing costs?

The imputed housing costs are made up of three items: mortgage interest (mortgage × 5%, ~70% of the costs), amortization (1% p.a.; the 2nd mortgage above 65% loan-to-value is repaid over 15 years, ~13%) and incidental costs (purchase price × 1% for maintenance and repairs, ~17%). Together they yield the annual imputed housing costs, which are set in relation to income.

What income do I need for a property of CHF 1 million?

With a purchase price of CHF 1,000,000 and 20% equity, the mortgage is CHF 800,000. The imputed interest amounts to CHF 40,000 (5%), the amortization of the 2nd mortgage to CHF 8,000 (CHF 120,000 ÷ 15 years) and the incidental costs to CHF 10,000 (1%). This gives a total of CHF 58,000 in imputed housing costs — requiring a gross income of around CHF 176,000 (CHF 58,000 ÷ 33%).

How do I improve a tight affordability situation?

The guide lists several levers: more equity (lowers the mortgage and interest costs), a cheaper property, a joint-and-several debtor or guarantor, and a different bank — cantonal banks and Raiffeisen sometimes calculate with 4.5% instead of 5%, which can lower the income threshold by CHF 10,000–20,000. Indirect amortization via Säule 3a or a SARON mortgage with a lower imputed rate also help. It is recommended to compare 3–5 banks.

What are the banks' knock-out criteria?

Before the rating, there is a hard KO check: affordability above 33% of gross income, equity below 20% (of which at least 10% must be "hard" equity), active debt-collection proceedings or certificates of loss, negative ZEK or CRIF entries, as well as a lack of verifiable regular income (at least 12 months). Paid debt-collection proceedings remain visible for 5 years, certificates of loss for 20 years. Anyone who fails here is rejected — regardless of income.