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Ratio between expenditure for the property and buyer's income, expressed in percent. Affordability can be calculated with various formulae. In order to calculate expenditures, often with a loan-to-value-ratio under 66 percent, a calculatory interest rate of 5 percent plus 1 percent of the property value (for renovations necessary to maintain the value) is used as a basis. For a loan-to-value-ratio exceeding 66 percent, a surcharge of 1 percent in amortisations applies. Many mortgage providers will not grant financing if affordability exceeds 33%.
Example with loan-to-value-ratio under 66 percent: Value of property CHF 700,000; Mortgage CHF 400,000; Gross income CHF 100,000. The expenditures are CHF 27'000 (CHF 20,000 interest charge, CHF 7,000 maintenance costs). Assuming an income of CHF 100,000, an affordability of 27 percent results.
Example with loan-to-value-ratio exceeding 66 percent: Value of property CHF 700,000; Mortgage CHF 500,000; Gross income CHF 100,000. The expenditures are 37,000 (CHF 25‘000 interest charge, CHF 5,000 maintenance costs). Assuming an income of CHF 100,000, an affordability of 37 percent results.
Calculate affordability and loan-to-value ratio: Mortgage calculator