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Old 24.11.2021, 01:22
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House affordability formula

Hello,

Where can I find the formula to calculate the maximum house purchasing affordability for Switzerland.

I need a formula that does not need a property price pre determined.
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Old 24.11.2021, 03:05
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Re: House affordability formula

I * 20%
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Old 24.11.2021, 10:22
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Re: House affordability formula

There isn't a simple formula as there are many variables.

The affordability criteria versus income is mortgage value *5% interest + mortgage value *1% maintenance + annual amortisation <= 33% annual income

But the amortisation rate will depend on your downpayment. Generally you need to get to 65% LTV within 15 years. As most people put down 20% that equates to 1% of the mortgage value per year. If you put down more than 20% this would be less. If the amortisation period is shorter e.g. because you are nearing retirement age it would be higher.

In normal circumstances* at least 20% downpayment is needed. Of this a minimum of 10% must be what is called your "own funds", which is either cash or a pledge of a securities portfolio (which would have its own LTV applied). Above the minimum 10% can come from either withdrawing or pledging your pension fund, but can also be your own funds. There is no maximum to the amount you can withdraw from the pension or contribute from your own funds. Remember that pledging blocks collateral, but does not reduce the interest payment as the mortgage amount will be larger.

*Someone may come along and say they didn't need to put down 20%. Anecdotally lenders will occasionally reduce the requirement, but it's not clear under what circumstances.
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Old 24.11.2021, 10:32
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Re: House affordability formula

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There isn't a simple formula as there are many variables.

The affordability criteria versus income is mortgage value *5% interest + mortgage value *1% maintenance + annual amortisation <= 33% annual income

But the amortisation rate will depend on your downpayment. Generally you need to get to 65% LTV within 15 years. As most people put down 20% that equates to 1% of the mortgage value per year. If you put down more than 20% this would be less. If the amortisation period is shorter e.g. because you are nearing retirement age it would be higher.

In normal circumstances* at least 20% downpayment is needed. Of this a minimum of 10% must be what is called your "own funds", which is either cash or a pledge of a securities portfolio (which would have its own LTV applied). Above the minimum 10% can come from either withdrawing or pledging your pension fund, but can also be your own funds. There is no maximum to the amount you can withdraw from the pension or contribute from your own funds. Remember that pledging blocks collateral, but does not reduce the interest payment as the mortgage amount will be larger.

*Someone may come along and say they didn't need to put down 20%. Anecdotally lenders will occasionally reduce the requirement, but it's not clear under what circumstances.
Nice overview, thanks. Some companies have special deals and rates for employee benefits like only needing 15% deposits and reductions on the standard rates.
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Old 25.11.2021, 20:11
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Re: House affordability formula

We have a combined income of 140 000 CHF, and 175 000 CHF in savings.

I would like to have the formula so that I can put it into excel and figure out the sweet spot, or if it even worth it to make an offer or bid.
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Old 25.11.2021, 20:19
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Re: House affordability formula

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We have a combined income of 140 000 CHF, and 175 000 CHF in savings.

I would like to have the formula so that I can put it into excel and figure out the sweet spot, or if it even worth it to make an offer or bid.
Ubs and other banks have a mortgage calculator online
https://www.ubs.com/ch/en/private/mo...alculator.html
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Old 25.11.2021, 20:22
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Re: House affordability formula

And the CS one: https://www.credit-suisse.com/ch/en/...AaAhPuEALw_wcB

Google hypothekenrechner

But beware there are rumors the 20% deposit requirement might change to 30% then the prices will go temporarily down.

Last edited by justpassingby; 25.11.2021 at 20:27. Reason: Deposit
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Old 25.11.2021, 21:37
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Re: House affordability formula

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Hello,

Where can I find the formula to calculate the maximum house purchasing affordability for Switzerland.

I need a formula that does not need a property price pre determined.
Use a calculator that you've clearly already found - play around with the figures. It's not difficult.
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Old Yesterday, 00:05
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Re: House affordability formula

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We have a combined income of 140 000 CHF, and 175 000 CHF in savings.

I would like to have the formula so that I can put it into excel and figure out the sweet spot, or if it even worth it to make an offer or bid.
875000 chf if you downpay 20%
Ca 1000000 chf if tour bank acceps 17.5% downpayment

That is nominal, but some percent will be neesed for notary and purchase costs. I would target 10% less.
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