Debt-to-income ratio: definition

The debt-to-income ratio indicates the share of your income used to repay your debts, in particular the mortgage charges linked to buying your home with a mortgage loan. In Switzerland, this ratio is one of the key indicators used by banks, insurers and pension funds to assess whether your real estate project is sustainable in the long term for your budget.

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Understanding the debt-to-income ratio in Switzerland

When applying for a mortgage in Switzerland, the debt-to-income ratio helps answer a simple question: is your income sufficient to cover all your fixed expenses over time? It is not only about checking whether you can pay during the first year, but about assessing your situation over the entire investment horizon of the property, even if interest rates rise or your expenses increase.

In practice, the debt-to-income ratio compares:

• your regular gross income (salary, stabilised self-employed income, pensions);
• your theoretical mortgage charges (interest, amortisation, maintenance);
• and your other financial commitments (leasing, consumer loans, alimony payments, etc.).

Swiss lenders (banks, insurers, pension funds) generally apply a simple rule: theoretical mortgage charges and other debts should not exceed around one third of your gross income. Above this level, your budget is considered too tight and the risk of payment difficulties in the medium to long term increases.

How lenders calculate your debt-to-income ratio

The debt-to-income ratio for a mortgage is not calculated on the basis of your current effective costs, but using prudent assumptions. This cautious approach protects both the bank and you by including a safety margin if rates rise or your situation changes.

In simplified form, the formula used is:

Debt-to-income ratio = (theoretical mortgage charges + other debts) / gross annual income

The theoretical mortgage charges generally include:

• Theoretical interest, calculated on the mortgage amount with a prudent rate (for example around 4.5–5% per year), even if your effective rate at signing is lower.
• Amortisation, i.e. the repayment of part of the capital, usually so that the debt is reduced to 2/3 of the property value over roughly fifteen years.
• Theoretical maintenance and ancillary costs, often estimated at around 1% of the property value per year to cover works, repairs and co-ownership charges.

To these mortgage charges, the bank adds your other recurring debts:

• car leasing;
• consumer loans or credit cards that are not fully paid off;
• alimony payments;
• other regular documented commitments.

The result is then compared with your gross income (often on an annual basis). If the ratio is below or equal to the limit set by the bank, your debt-to-income ratio is considered acceptable. Otherwise, the institution will regard your project as exceeding your financial capacity.

Example of how the debt-to-income ratio is calculated

To make the concept more tangible, let us take a simplified example based on common practice in Switzerland.

You wish to buy an apartment worth CHF 850’000.–. You provide CHF 250’000.– in equity. The mortgage financing therefore amounts to CHF 600’000.–.

The bank calculates your theoretical mortgage charges as follows:

• Theoretical interest (prudent rate of 5%): CHF 600’000.– × 5% = CHF 30’000.– per year.
• Amortisation (for example 1% of the mortgage amount per year): CHF 600’000.– × 1% = CHF 6’000.– per year.
• Theoretical maintenance costs (1% of the property value): CHF 850’000.– × 1% = CHF 8’500.– per year.

The theoretical annual mortgage charges therefore amount to:

CHF 30’000.– + CHF 6’000.– + CHF 8’500.– = CHF 44’500.– per year

Let us assume that your household has a gross annual income of CHF 150’000.– (fixed salary paid 13 times, stabilised bonuses). On this basis, your debt-to-income ratio would be:

Debt-to-income ratio = CHF 44’500.– / CHF 150’000.– ≈ 29.7%

If you have no significant leasing or other loans, this debt-to-income ratio of around 30% is generally within the range considered acceptable by many institutions (subject to a full review of your file).

If, however, you also had car leasing of CHF 600.– per month (i.e. CHF 7’200.– per year) and a consumer loan of CHF 300.– per month (i.e. CHF 3’600.– per year), your other debts would amount to CHF 10’800.– per year. Your total charges would then be:

CHF 44’500.– + CHF 10’800.– = CHF 55’300.–

Your debt-to-income ratio would become:

Debt-to-income ratio = CHF 55’300.– / CHF 150’000.– ≈ 36.9%

In this scenario, your debt-to-income ratio clearly exceeds the one-third threshold of gross income. The bank could consider the project too tight and require higher equity, a lower purchase price or the prior repayment of certain debts.

What debt-to-income ratio is acceptable for a mortgage?

In Switzerland, many lenders apply the rule of about 33% of gross income. This means that:

• below 30%, your situation is generally considered comfortable, subject to other factors (job stability, age, household structure);
• between 30% and 33%, your project is often acceptable, but the institution may examine your file in more detail;
• above 33–35%, the risk is deemed too high and the financing in its current form is likely to be refused.

This is not a law, but a widely used prudential practice. Each institution can apply its own internal rules, sometimes stricter, for example for certain property types, variable incomes or people close to retirement.

Your debt-to-income ratio is therefore not just a mathematical value: it is a key indicator of your ability to bear mortgage charges over the long term. Below the threshold, your chances of obtaining approval improve, although this does not automatically guarantee that the loan will be granted. Above the threshold, the project (price, equity, debts) generally needs to be adjusted.

Difference between the debt-to-income ratio and overall financial capacity

The debt-to-income ratio is a central indicator, but it does not capture your overall financial capacity on its own. The bank also reviews other factors:

• the stability of your income (open-ended employment contract, track record as self-employed, etc.);
• how your situation is likely to evolve (proximity to retirement, family plans, reduced working time);
• the level and origin of your equity (savings, 2nd pillar, gifts);
• your safety liquidities after the purchase (the financial “buffer” that remains available in case of unforeseen events).

For example, your debt-to-income ratio may be below 33%, but you might have very little liquidity left after buying the property, which would leave you exposed if urgent works or a drop in income were to occur. Conversely, a slightly higher ratio combined with sizeable reserves and very stable incomes can sometimes be accepted.

The aim is not only to obtain financing, but financing that remains sustainable and comfortable over time. This is why it makes sense to complement the simple ratio with a broader view of your budget, your goals and your life plans.

How to reduce your debt-to-income ratio before applying for a mortgage

If an initial simulation shows that your debt-to-income ratio is too high, there are several concrete levers you can use to improve your file before submitting a formal application.

Here are some commonly used options:

• Increase your equity : by strengthening your own funds (additional savings, early withdrawal from the 2nd pillar, 3rd pillar, family gift), you reduce the mortgage amount and therefore the theoretical interest and amortisation.
• Lower the price of the property you are targeting: slightly adjusting your purchase budget can have a major impact on theoretical mortgage charges and bring your debt-to-income ratio below the desired threshold.
• Repay or reduce certain debts: paying off leasing, a consumer loan or a credit card balance can significantly improve your ratio.
• Structure your project differently: in some cases, it may be worth considering a more modest condominium (PPE), a property in a slightly cheaper municipality or a combination of mortgages (for example part fixed-rate, part SARON) suited to your risk profile.
• Optimise your declared income: for self-employed people or those with variable bonuses, the way income is documented and evidenced (statements, track record) can influence how these amounts are taken into account by the bank.

Professional support usually helps identify the most effective levers for your situation. In some cases, a few targeted adjustments are enough to make a project financeable without giving up your homeownership plans.

Why should an independent specialist analyse your debt-to-income ratio?

Calculating a debt-to-income ratio may seem simple, but reality is more nuanced. Each institution applies its own assumptions, its own way of taking certain income (bonuses, overtime, allowances) into account and its own view of your existing commitments. An independent analysis helps you understand exactly where you stand before approaching banks.

A broker or mortgage financing specialist will:

• check your debt-to-income ratio in line with Swiss market practice;
• simulate several scenarios (different property, different level of equity, use or no use of pension assets);
• identify the weak points in your file and possible measures to improve them;
• help you present a coherent and well-argued file to lenders.

The aim is not only to obtain a “yes” for your mortgage, but to do so under conditions that remain comfortable for you. With expert support, you gain clarity, time and negotiating power.

If you wish, you can request an assessment of your debt-to-income ratio and your budget even before you have chosen a specific property. This allows you to define a realistic price range, know how far you can go without jeopardising your financial balance and visit properties with greater peace of mind. You can also use a mortgage calculator to estimate charges based on your current financial situation.

Practical tips to manage your debt-to-income ratio on a daily basis

Beyond the key moment of applying for a mortgage, the debt-to-income ratio is a useful concept for managing your budget over the long term. A few simple habits can help you keep your level of debt healthy.

• Review your budget regularly: updating your income and expenses at least once a year helps you see whether new commitments (subscriptions, leasing, loans) are reducing your room for manoeuvre.
• Limit consumer credit: taken together, these commitments can quickly push your debt-to-income ratio above the levels acceptable for a future mortgage renegotiation.
• Build and preserve an emergency fund: keeping a few months of fixed expenses in a separate account increases your resilience in case of unforeseen events.
• Anticipate major life events: having a child, reducing your working hours, retirement… all these can affect your income and the balance of your debt-to-income ratio.

By becoming familiar with this concept, you gain autonomy and decision-making power. You can then adjust your real estate plans, your savings and your financial commitments so that your homeownership project remains a source of stability rather than stress.

Important note

The numerical examples and explanations presented here are indicative and simplified. They do not constitute a financing offer or personalised financial or tax advice. The criteria used to grant loans and calculate the debt-to-income ratio may vary from one institution to another and should always be confirmed as part of a detailed analysis of your situation with a specialist.

Useful resources on debt and taxation

• Use the imputed rental value and your mortgage debt to reduce your taxes.
• Tax deductions: how to deduct and how much?
• Our FAQ page answers many other questions.