Calculating your buying capacity before you visit

The question almost always comes up at the viewing, not before. You have seen the house, imagined your life in the garden, and it is only on the way home that you reach for a calculator. That is the moment — too late — when you realise that calculating your buying capacity should have been the first step, not the last. A figure established before viewings changes everything: it frames the search, lends credibility to an offer, and prevents you from falling for a property that is out of reach.

Here is how this calculation works, what causes it to vary, and what you can do to establish it properly before you step through a first door.

The two foundations of the calculation

Buying capacity rests on two distinct questions that banks always ask together. The first: do you have enough equity? The second: is your income sufficient to bear the cost of the loan?

On equity, the rule in Switzerland is fixed: at least 20% of the purchase price. Of that 20%, at least half — i.e. 10% of the price — must come from so-called "hard" funds: savings, inheritance, gifts, a pillar 3a withdrawal, or the surrender value of a life insurance policy. The other half may come from the second pillar (occupational pension), meaning your pension fund, but that withdrawal carries tax consequences and implications for your future retirement provision that are worth examining before you use it.

On top of that 20% come the purchase costs. In the canton of Vaud, the buyer bears the property transfer duties (droits de mutation), notary fees, and the land register fee. Allow roughly 4–5% of the purchase price to cover all of these. These amounts are not part of your mortgage: they come out of your own pocket on the day of the notarised deed.

The theoretical affordability cost, not the current rate

This is where many home calculations go wrong. Swiss banks do not calculate the cost of your mortgage using the rate you will actually obtain. They use a theoretical rate, often set at around 5%, to ensure that you could still meet repayments if rates were to rise. This figure has remained broadly unchanged over the years, regardless of market conditions: it is a safety net, not a forecast.

Added to this theoretical rate are two further items: amortisation and maintenance costs. Amortisation applies to the portion of the mortgage known as the "second-rank" tranche — the part that exceeds 65% of the property's value. That tranche must, as a general rule, be repaid within fifteen years. As for maintenance costs, banks typically allow 1% of the property's value per year, sometimes more for older buildings.

The sum of these three items — theoretical interest, amortisation, and maintenance — must generally not exceed one third of your gross annual income. This is the theoretical affordability cost (charge théorique) rule, which is separate from the equity question. It is entirely possible to have sufficient equity and still fail this income test: the two conditions are cumulative.

What causes the result to vary

Several factors shift the outcome, sometimes significantly.

• The composition of income. A fixed salary is treated differently from self-employment income or variable income (bonuses, commissions). Banks often smooth variable income over two or three years, and some count only a fraction of it.
• The borrowers' age. The closer you are to retirement, the more closely the bank examines what your income will be once you retire. A couple in their fifties buying a property often needs to demonstrate that the mortgage cost remains manageable on a reduced income.
• Existing liabilities. A leasing agreement, a consumer loan, maintenance payments: all of these reduce the margin available for the mortgage cost.
• The value retained by the bank. The bank lends on the basis of the value it assigns to the property, not necessarily the price agreed between seller and buyer. If it values the property below the purchase price, the difference must be covered by additional equity.
• The commune and property type. A flat in Lausanne, a villa in Pully, a chalet in Montreux: the lending values that banks accept vary according to the liquidity of the local market and the type of property.

Why to act before viewings

Viewing properties without having calculated your buying capacity exposes you to three concrete difficulties. The first: wasting time on properties outside your budget, which is tiring and clouds your judgement. The second: making an offer that the bank will not confirm, leaving you in an awkward position with the seller. The third, more subtle: being drawn upwards by a property slightly beyond your means, in the hope that it will somehow work out.

Conversely, a buyer who comes forward with verified financing is taken seriously. In a market where sellers sometimes receive several offers, financial credibility carries as much weight as the price proposed. This is one of the reasons the Buyer Passport exists: it formalises that verification before the search begins, and spares you from negotiating in the dark.

What you can do yourself

Before meeting a bank or a broker, you can lay the groundwork by gathering a few pieces of information.

1. List your available equity: savings, realisable investments, pillar 3a, life insurance surrender value. Note separately what may come from the second pillar.
2. Calculate your household's gross annual income, distinguishing what is fixed from what is variable.
3. Record your monthly financial commitments: leasing agreements, loans, maintenance payments.
4. Apply the 20% equity rule and the one-third of gross income rule mentally. This gives a first rough range.

This home calculation does not replace confirmation from a bank, but it allows you to arrive at that meeting with a clear idea of what you are looking for — and to save several weeks in your search. Our online tool to calculate your buying capacity takes things a step further, using the real parameters of the Romandy market.

Calculating your buying capacity before you view transforms an intention into a project: you search less, find better, and negotiate from a solid position.

The result of this calculation depends on your personal situation — household composition, nature of income, source of equity, age, life plans. Two households with the same income can arrive at very different answers. If you would like to establish the framework for your project before starting viewings, buyer representation begins precisely there: a meeting to put the figures in the right order and build a search that has a genuine chance of succeeding.