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Loans & mortgagesMortgagesGlossary


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%:

Value of property CHF 700,000 
MortgageCHF 400,000
Gross incomeCHF 100,000
Expenditures CHF 27'000 (CHF 20,000 interest charge, CHF 7,000 maintenance costs)
Affordability27% (assuming an income of CHF 100,000)

Example with loan-to-value-ratio exceeding 66%:

Value of property CHF 700,000 
MortgageCHF 500,000
Gross incomeCHF 100,000
ExpendituresCHF 37,000 (CHF 25‘000 interest charge, CHF 7,000 maintenance costs and CHF 5,000 amortization surcharge)
Affordability37% (assuming an income of CHF 100,000)
Calculate affordability and loan-to-value ratio

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