Affordability requirements for mortgage in Switzerland

I read that in Switzerland, around two-thirds of the population cannot mortgage a home because of the tough affordability regulations.

Is there any other way to finance a home for my family?

Greetings,

Most Swiss lenders you an imputed interest rate of 5% when calculating your ability to service a mortgage. An inititiative by the Raiffeisen Bank to use a lower imputed interest rate for afforability calculations led to a reprimand by FINMA (the Swiss financial regulatory authority).

However, there are still small differences in the imputed interest rates used by different lenders. For example, some lenders use a 4.5% imputed annual interest rate. You can find lender-specific information on the moneyland.ch information pages corresponding to each lender. A good first step is to ask prospective lenders what calculation will be used for your personal situation.

Another option is to increase your down payment. Making a larger down payment results in a smaller mortgage which is easier to be approved for and to service. If you cover a larger part of your home purchase yourself, the income requirements for getting a mortgage will be lower.

Money for your down payment can be obtained from a number of different sources. For example, you can use assets held by your occupational pension fund (pillar 2a) and those held in your private retirement savings (pillar 3a). You can also use money from early inheritance distributions and gifts.

The high imputed interest used may seem unfair, but it serves to lower the high demand for Swiss property. If you do not have enough income to meet mortgage affordability requirements, you would likely find it difficult to meet the costs of servicing a mortgage and maintaining a home. You can find out whether buying or renting a home makes more sense for you by using the rent or buy calculator.

Best regards from Moneyguru

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