Affordability: definition

Affordability refers to your ability to sustainably bear the costs linked to a mortgage loan, while meeting the debt-ratio standards accepted by lenders (banks and insurers).

Assessing your affordability

Banks check that the sum of theoretical interest, amortisation and maintenance costs does not exceed a fraction of your income, often around one third. They use prudent calculation rates, sometimes higher than market rates, to stress-test your budget in the event of rising rates. Good affordability assumes stable income, manageable overall debt and a cash buffer after the purchase.

Example calculation of your affordability

For example, with a gross income of 10 000 CHF per month, the bank may cap your theoretical housing costs at around 3 300 CHF per month. If interest, amortisation and the estimated maintenance costs for the property you want total 2 800 CHF, your debt ratio remains within the acceptable range. However, if these costs reach 3 800 CHF, the project is likely to be rejected or will require more equity or a cheaper property.