Are you planning to buy your own house or appartment? In fact, mortgage rates are at an historic low in Switzerland and it is a good time to buy real estate. However, do you know if you are eligible to become an owner? What are the conditions to get a mortgage? Explanation.
The conditions for a mortgage
If only a bank can study your situation in detail and give you an answer, there are at least two necessary conditions to get a mortgage. Those are:
- The own funds: or the personal contribution for the purchase. This contribution can be composed maximum at 50% of a 2nd pillar. The own funds should be at least 20% of the total price of the property.
- The debt ratio: all costs linked to the property should be maximum at 33% of the househould’s income. Those costs include the mortgage interest, maintenance costs and finally the amortization.
How is debt ratio calculated?
The debt ratio depends in one hand of the income of the borrower, but of the costs linked to the property as well. The latter depends mainly of the interest rate of the mortgage, which is historic low in 2016. A lower interest rate means lower costs and, thus, a lower debt ratio… at least in theory. In reality, banks don’t use the realy interest rate to calculate the costs, but use a 5% interest rate for security reasons. Therefore, many households who could afford a mortgage have their application turned down.
Under one household out of two
In practice, more than half of the households do not have access to propety in Switzerland. A study from Moneypark have yelded these figures:
| Real estate cost | Household income | Mortgage possibility |
| 100’000 – 596’000 | 18’000 – 105’000 | 47% of households |
| 596’000 – 780’000 | 105’000 – 137’000 | 29% à 47% households |
| 780’000 – 990’000 | 137’000 – 174’000 | 16% à 29% households |
| 990’000 – 1’310’000 | 174’000 – 230’000 | 6% à 16% households |
| More than 1’310’000 | > 230’000 | 6% dhouseholds |
Consider talking to a financial advisor
Experience has shown that the help of a mortgage specialist can positively affect the chances to get a mortgage. Thus, is could be a good idea to talk to such a specialist, or ask a mortgage agency (like Multicredit) to get better chances, or even to negociate a lower rate.
Changes to come
Discussions are ongoing to allow households to become owner more easily. However, there are things that remain to be done, knowing that less than 40% of households are owner in Switzerland.
