Buying property: calculate your debt-to-income ratio like a Swiss bank

You've found your dream property and your down payment is ready—but will the bank say yes? In Switzerland, lenders don't assess your borrowing capacity based on current market rates. They use a much more rigorous simulation, and understanding it before you commit can save you from costly disappointment.

Tip of the day — The golden rule

Before making any purchase offer, calculate your theoretical expenses with a notional interest rate of 5% + 1% of the property price for annual maintenance: the total should not exceed one third of your gross income.

Why this is important

• Swiss banks do not use the actual interest rate. Even though mortgage rates are currently around 1.5% to 2%, financial institutions systematically calculate your creditworthiness based on a theoretical rate of 5% — a safety margin that protects both the bank and the borrower in the event of rising rates.

• The debt-to-income ratio is a lending criterion, not a recommendation. If your projected monthly payments exceed 33% of your gross household income, financing will be refused in the vast majority of cases, regardless of your down payment or credit history. This threshold may vary slightly depending on the lender and the borrower's profile.

• Anticipating your needs gives you negotiating power. Knowing your actual budget allows you to target affordable properties, avoid wasting time on unfinanceable projects, and arrive at bank meetings with solid figures.

How to apply it today — 5-step checklist

1. Note the intended purchase price (e.g. CHF 800,000).

2. Calculate the loan amount: price – your minimum down payment of 20% (of which a maximum of 10% can be in a 2nd pillar pension fund). Ex.: CHF 640,000 borrowed.

3. Estimate the theoretical annual interest: amount borrowed × 5%. Ex.: CHF 640,000 × 5% = CHF 32,000/year.

4. Add the theoretical maintenance costs: property price × 1%. Ex.: CHF 800,000 × 1% = CHF 8,000/year. (Some banks use 0.8%, but 1% is the most common convention.)

5. Compare at the one-third threshold: add the two items (CHF 40,000) and verify that they do not exceed one-third of your gross annual income. In this case, a gross income of at least CHF 120,000 per year would be required.

Amortization (repayment of capital) is sometimes added to the bank calculation — check with your advisor, as practices vary between institutions.

Common mistakes to avoid

• Consider the current market rate. A rate advertised at 1.8% might give the impression that the property is easily accessible—but it's the 5% rate that matters to the bank. The difference can be crucial.

• Don't forget about the "maintenance" cost. Many first-time buyers only include interest in their calculations. The 1% maintenance cost (CHF 6,000/year for a property worth CHF 600,000) significantly impacts the debt-to-income ratio and is rarely negligible.

• Confusing net income with gross income. The one-third threshold applies to the household's gross income (before taxes and social security contributions). Using your net salary leads to overestimating your ability to earn and unpleasant surprises.

Mini numerical example

Situation : Lucie and Marc, a couple, wish to buy an apartment in Lausanne for CHF 750,000. Their down payment is CHF 150,000 (20%). Gross household income: CHF 130,000/year.

Job	Calculation	Annual amount
Theoretical interest (5%)	CHF 600,000 × 5%	CHF 30,000
Theoretical interview (1%)	CHF 750,000 × 1%	CHF 7,500
Total theoretical charges		CHF 37,500
Threshold 1/3 of gross income	CHF 130,000 ÷ 3	CHF 43,333

Key points to remember

The bank does not lend to you based on today's rates, but on your ability to repay if rates rise to 5%: do this calculation before falling in love with a property.

💡 Would you like to receive practical Swiss real estate advice like this every week? Subscribe to the Facilimmo.ch newsletter — it's free, no obligation, and you can unsubscribe with just one click. And to learn more, check out our dedicated article on the criteria for obtaining a mortgage in Switzerland.