Mortgage calculator: estimate your financial capacity

Before starting a purchase project, it is advisable to first assess your borrowing capacity. Indeed, the cost of a mortgage has a significant impact on your finances:

• To evaluate your financial capacity, you must take into account not only the loan amount, but also interest expenses and maintenance costs.
  
• To obtain a first reliable estimate of your financial affordability, it is essential to use an online mortgage simulator.
  
• This tool allows you to measure your borrowing capacity, assess whether your equity meets the minimum requirements (20%), and anticipate the long-term costs of your home.

Why use a Swiss mortgage calculator?

The mortgage calculator is a pre-approval tool. It reproduces the two golden rules used by virtually all Swiss banks. By using it, you obtain a clear answer to the question: "Is this property financially viable for me?"

Determine your financial affordability

To determine whether you are able to repay a mortgage, banks do not look only at your income. They simulate a situation in which interest rates are very high to ensure that you remain solvent.

Debt ratio (or affordability ratio)

To do so, institutions calculate the theoretical annual housing burden by adding three elements:

• Imputed interest: the annual cost of your mortgage if interest rates were to rise to 5% (calculated on the total mortgage amount);

• Amortization: the mandatory repayment of part of the debt (if the mortgage exceeds 66% of the property value);

• Ancillary costs: including maintenance, running costs, and minor renovations, which generally amount to 1% of the property value.

By adding these three costs together, the annual reference burden is obtained.

The 33% rule

Your annual reference burden must never exceed one third (33%) of your annual gross income. If this threshold is exceeded, the bank considers the risk to be too high. As a result, access to a mortgage will be denied, even if you have substantial savings.

This is precisely why using a mortgage simulator is so valuable: it determines the maximum price you can afford when purchasing your home.

Assess your loan-to-value ratio

The loan-to-value ratio (or lending ratio) measures the share of the mortgage in relation to the total value of the property. It sets the maximum amount you are allowed to borrow.

The 20% rule

Your personal contribution (equity) must represent at least 20% of the purchase price of the property.

Attention: the bank requires that at least half of these 20% (i.e. 10% of the property price) come from liquid assets (savings, securities, gifts, inheritance) and not from occupational pension assets (2nd or 3rd pillar).

Calculation of the loan-to-value ratio

The simulator uses the following simple formula to verify compliance with the limit:

• Mortgage / Property value × 100

The resulting ratio must be less than or equal to 80%.

If this threshold is exceeded, no financial institution in Switzerland will finalize the financing. The calculator will indicate how much additional equity you need to raise.

How to use a mortgage calculator?

The simulator does more than perform a simple addition. It checks whether all your figures comply with Swiss mortgage financing rules. Here is how to make proper use of this valuable tool.

Step 1: Enter your personal data

This part concerns your personal situation and what you can realistically contribute to the project:

• Your annual gross income: this is the basis for calculating affordability (the famous 33% threshold). The tool immediately checks whether your income is sufficient to cover future housing costs.

• Your available equity: this is your personal contribution (savings, securities, etc.). The simulator checks whether you reach the 20% minimum required by banks.

• Use of the 2nd / 3rd pillar: you must indicate whether part of your equity comes from pension assets. The tool ensures that the liquid portion outside pension funds reaches the mandatory 10%.

This information is used to determine your theoretical borrowing margin.

Step 2: Enter the property characteristics

At this stage, you enter the details of the planned purchase:

• The purchase price of the property: the simulator compares it with your equity to determine the loan-to-value ratio, i.e. the portion financed by the bank.

• The desired mortgage structure: even if you do not yet know the exact interest rate, the tool needs to know whether you prefer direct or indirect amortization (via Pillar 3a), as this slightly affects the simulated annual burden.

The tool then performs an initial screening:

1. If the price is too high relative to your income, the debt ratio exceeds the limit.

2. If the price is too high relative to your savings, the loan-to-value ratio creates a financing blockage.

Step 3: Obtain the financing projection

Once the data has been entered, the calculator applies banking standards to give you a clear picture of the situation.

To perform a reliable cost simulation, it uses a theoretical interest rate of 5%, to which it adds mandatory amortization, before integrating the flat 1% allowance for property maintenance costs.

The result takes the form of a structured projection that answers your key questions:

• What is the maximum amount you can finance?

• What is your theoretical annual housing burden?

• Where does your project stand relative to the 33% threshold?

This summary shows what is immediately financeable, what requires adjustment (increasing equity, lowering the purchase price), and what remains out of reach.

Some examples of debt ratio calculations

Example 1: Solid income and reasonable objective

A couple earning CHF 150,000 gross aims to purchase a property priced at CHF 900,000 with CHF 200,000 in equity. The theoretical annual burden is around CHF 48,000. The debt ratio remains below the threshold, validating the financing.

Example 2: Adequate equity but insufficient income

A single buyer earning CHF 95,000 has CHF 180,000 in equity for a property priced at CHF 800,000. However, the income is insufficient: the theoretical cost clearly exceeds the acceptable limit. The financing is blocked.

Example 3: High affordability and comfortable financial margin

A couple earning CHF 230,000 is aiming to purchase a property priced at CHF 1,200,000 with CHF 300,000 in equity. The financial burden remains well within limits. The project meets the criteria without strain.

Do you wish to access property ownership? We have our own mortgage calculator to help you!

dreamo.ch offers, on all properties for sale, a financial capacity calculator accessible by clicking on the "Financing" button on the page of the property that interests you.