Affordability: how much home you can actually buy
Banks want two things: 20% equity and housing costs below a third of your income — calculated at a 5% rate, not today’s. What that means in francs, and how much you can afford — with a calculator.
Income for the median apartment to buy · Switzerland
Plus about CHF 198,000 equity — what banks require, on paper, to buy at the Swiss median price of CHF 990,000.
The two hurdles
Whether you can finance a home comes down to two hurdles — both must be cleared. The first is equity: the bank lends at most 80% of the price, you bring the rest. The second is affordability: your ongoing housing costs may not exceed a third of your gross income. These rules are a FINMA-recognised self-regulation of the banks — the details vary slightly from bank to bank.
Hurdle 1: 20% equity
At least 20% of the price must come from your own funds. The source matters: at least half of that — 10% of the price — must be “hard” equity: savings, securities or Pillar 3a. Money from the pension fund (2nd pillar) may be used, but it does not count toward that hard 10%.
- Hard equity (min. 10%): savings, securities, Pillar 3a, a gift or an advance on inheritance.
- Further equity (up to 20%): early withdrawal or pledge of the pension fund (2nd pillar) — though this lowers your later pension.
- Example CHF 990,000: CHF 198,000 equity, of which at least CHF 99,000 hard.
Hurdle 2: affordability — a third of income
Ongoing housing costs may be at most a third of gross income. Three items go into that calculation — and crucially, not at today’s rate but at calculatory values:
- Calculatory rate: 5% on the whole mortgage (not the current market rate).
- Maintenance and ancillary costs: about 1% of the property value per year.
- Amortisation: the 2nd mortgage (the part above 66% of value) spread over 15 years.
Why the bank calculates with 5%
The bank’s stress test
CHF 15,840 per year
CHF 39,600 per year
Today this mortgage costs about CHF 16,000 in interest a year. But the bank budgets with CHF 39,600 — as if the rate were 5%. That is why affordability demands such a high income even though you would currently pay far less. If rates rise, you are on the safe side.
Work it out
How much home can you afford?
Maximum purchase price
Limited by incomeCHF 849,057
Mortgage (80%): CHF 679,245 · Calculatory housing cost: CHF 4,167 per month
Estimate using the standard bank rules: 5% calculatory rate, 1% maintenance, 2nd mortgage amortised over 15 years, max 80% loan-to-value, housing cost ≤ ⅓ of income. At least 10% of the price must be “hard” equity (not from the 2nd pillar). Banks assess individually.
What if it isn’t (quite) enough?
- Top up equity: Pillar 3a, a gift or advance on inheritance, or pledging securities raises your own funds.
- Use the pension fund: an early withdrawal or pledge of the 2nd pillar lowers the mortgage needed — but note the lower pension.
- A second income: with a partner or co-buyer, the combined income counts toward affordability.
- A cheaper home or more savings: as a rule of thumb you can afford roughly 5.7× your gross income as a purchase price.
Frequently asked questions
- How much equity do I need?
- At least 20% of the price, of which at least half (10% of the price) must be “hard” equity — not from the pension fund (2nd pillar).
- What rate does the bank use?
- A calculatory rate of about 5%, not the current market rate. This keeps the financing affordable even if rates rise.
- How much income do I need for CHF 1 million?
- Roughly CHF 175,000–180,000 gross. Rule of thumb: maximum price ≈ gross income × 5.7 (and equity × 5).
- Can I use pension-fund money?
- Yes, via early withdrawal or pledge. It counts toward the 20% but not toward the hard 10%, and it lowers your later pension.
- What is the 2nd mortgage?
- The part of the financing above 66% of value (up to a maximum of 80%). It must be amortised (repaid) within 15 years or by retirement.