Calculate the necessary annual income
The following calculation example will show that you need an annual income of CHF 180,000 net for a property that is to cost CHF 1 million and for which you can raise CHF 200,000 in equity. The reason for this is that housing costs must not exceed 35 percent of net income.
Purchase price: 1,000,000 francs
Equity: CHF 200,000
Capital through mortgage: CHF 800,000
Division into
1st mortgage: 520,000 francs
2nd mortgage: CHF 280,000
Interest on 1st mortgage (4.5 %): CHF 23,400
Interest on 2nd mortgage (5.5 %): CHF 15,400
Amortization of 2nd mortgage in 20 years: CHF 14,000
Additional costs: 10,000 francs
Running costs: CHF 62,800
The result is that the mortgagee needs an income of around CHF 180,000 a year ((62,800 x 100) / 35).
To calculate the affordability, the calculated interest, the maintenance and ancillary costs and the amortization are added. The sum is then divided by the annual net income. This results in the value with which the annual income is charged. This value must not exceed 33 percent! Here is a calculation example:
Market value of the property: 750,000 francs
Equity: CHF 150,000
Borrowed capital: CHF 600,000
Income per year: CHF 142,000
Interest on the 1st mortgage (5 %): 500,000 x 5 % = 25,000 francs
Interest for the 2nd mortgage (6 %): 100,000 x 6 % = 6,000 francs
Total interest: CHF 31,000
Amortization in 15 years: 100,000 / 15 = 6,667 francs
Maintenance and incidental costs (1 % from the market value): 7,500 francs
Total annual costs: 45,167
Portability: 45,167 / 142,000 = 31.81 percent
Conclusion: The portability of the mortgage is less than 33 percent and is therefore certain.
There is a simple rule of thumb to calculate the maintenance and ancillary costs for the above example: The banks apply one percent of the market value of the property. This amount must be reserved annually for the property. This one percent value consists of 0.4 % for maintenance and 0.6 % for utilities. This is calculated as follows:
Market value of the property: 1,200,000 francs
Maintenance costs: 4,800 francs
Additional costs: 7,200 francs
Total costs per year: CHF 12,000
Basically, you need the purchase price of the property, your equity and the required capital from the bank or an insurance company to calculate the mortgage. From this, the mortgage can be calculated in a few steps.
The bank will incorporate any subtleties in the calculation into its detailed offer. The possible mortgages and the affordability of the mortgage can be calculated from the values for the annual costs and household income. Another calculation example:
Purchase price of the property: CHF 600,000
Annual gross income: CHF 120,000
Own funds: CHF 120,000
Required mortgage: CHF 480,000
Lending: 80 percent
Portability: 29 percent
Maintenance and ancillary costs: CHF 6,000 per year (CHF 500 per month)
Indicative interest rate: 1.12 %
Interest costs: CHF 448 per month
Amortization: CHF 444 per month
Costs per month: CHF 1,392
If you are wondering whether renting or buying is the better option, you should also do a calculation:
Purchase price of the property: CHF 600,000
Own funds: CHF 120,000
Mortgage rate: 1.21 percent
Additional costs: 6,000 francs per year
Rent for comparison: CHF 600 a month
Consideration period: 10 years
In this case, renting is significantly cheaper, over a period of 10 years you can save more than CHF 91,000. In both cases, the existing capital is offset. The problem is, however, that after ten years the rental property has not passed into your own assets.
If you pay off a mortgage, you will acquire long-term property that can also be used as a pension. It can be sold again and generally represents a profit. However, if you only live for rent, the landlord receives the money and can invest it.
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