Maximum Mortgage
How to Get the Highest Possible Mortgage
One of the key questions in real estate financing is what the maximum Mortgage amount can be. In practice, there are clear rules—but at the same time, there is also some flexibility that is often underestimated.
Restrictions
What is the maximum Mortgage amount?
Banks typically finance owner-occupied properties up to 80% of the property’s value—a minimum of 20% down payment is required. Those who can’t come up with that much will have a hard time: Higher Loan-to-value ratios are possible only in exceptional cases, such as when there are additional assets, an excellent credit rating, or other collateral.
However, such so-called options are rare and must be carefully considered. One thing that always applies, though, is that mortgage lenders calculate differently, which is why the maximum Mortgage amount varies from mortgage lender to mortgage lender. This flexibility can be used to your advantage.
ETP Mortgage
ETP stands for “exception to policy.” In the mortgage business, this means that a mortgage would not be possible under the Mortgage lender’s guidelines. However, the Mortgage lender makes an exception and approves the mortgage anyway—sometimes with stricter conditions, such as higher Amortizations or significantly less favorable interest rates.
Mortgage Structure
First and Second Mortgages
To understand how mortgage lenders calculate the maximum mortgage amount, you need to understand the “system of so-called first and second mortgages.” This is because a mortgage is usually divided into two parts:
First Mortgage
up to approx. 65% of the property valueSecond Mortgage
from 65% to 80%
Since a second Mortgage carries a higher risk for the bank, it must be repaid within 15 years or by the time the borrower retires.
A higher Mortgage means a higher risk for the bank and, as a result, usually higher interest rates for you as the Borrower. There are many ways to improve your credit score and thus secure better Mortgage rates.
Learn more here:
First and second mortgages explained
Optimize your Mortgage rating and get better interest rates
Liquid Assets
Minimum Down Payment
To purchase a home to live in, you need at least 20% —of which at least 10% must come from , i.e., excluding pension fund assets.
Equity includes:
- Savings
- Securities
- Gifts
- Lot already purchased with own funds
- (withdrawal or Pledge)
- (with restrictions)
So-called “owner contributions” (e.g., Renovations that a property owner performs on their own property) can also be partially taken into account. Banks are generally more likely to accept owner contributions (Pension funds and insurance companies rarely do), but even banks have become very restrictive in this regard in recent years.
Equity refers to the financial resources that a homebuyer contributes personally toward financing a property. In Switzerland, when purchasing a primary residence, at least 20% of the property’s value must generally be financed with the buyer’s own funds. At least 10% of this must come from so-called “hard equity,” such as savings, securities, gifts, or advance inheritance payments. The higher the equity, the lower the Mortgage amount, which improves Affordability and often leads to better Mortgage interest rates. However, the optimal amount of equity also depends on taxes, Precaution, liquidity, and personal investment strategy.
Hard equity refers to those own funds that do not come from occupational pension funds (Pension funds). These include, for example, bank deposits, securities, gifts, advance inheritance payments, or proceeds from the sale of another property. When purchasing a primary residence, most mortgage lenders require that at least 10% of the property’s value be financed with hard equity. Funds from a Pension fund generally cannot be used to replace this portion. Banks consider hard equity to be particularly valuable because it increases the buyer’s financial stability and reduces the financing risk. This often also improves the personal Mortgage rating and the negotiating position regarding mortgage interest rates.
Pillar 3a is a tied private pension plan in Switzerland that offers tax advantages. In the context of mortgages, it can be used for indirect amortization, Collateral, or home ownership promotion (WEF). Depending on your individual circumstances, Pillar 3a can help optimize your personal mortgage rating.
Pension funds are increasingly financing real estate and often offer very attractive mortgage rates. Especially for low Loan-to-value ratios and good Affordability, they are frequently among the most affordable mortgage providers in Switzerland. Anyone looking for the most affordable mortgage should definitely also compare pension fund mortgages.
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Affordability
How much income do I need?
In addition to equity, affordability is crucial.
Rule of thumb: Calculated housing costs should not exceed one-third of gross income.
In this context, banks do not base their calculations on current interest rates, but rather on:
- estimated interest rates (4.5% to 5.5%)
- Maintenance costs (0.7% to 1% of the property value)
- Ancillary costs
- Amortization
More and more mortgage lenders are offering a flat interest rate for both the first and second mortgages. In many cases, this rate is 4.5% or a maximum of 5%. In terms of Affordability, this “flat interest rate” is advantageous for homebuyers. Nevertheless, the requirements are strict, and it takes a significant amount of capital and income to buy a home today.
Example
Financing a property
For a purchase price of CHF 1,000,000, the typical breakdown is as follows:
- Equity: CHF 200,000
- Mortgage: CHF 800,000
Estimated housing costs can quickly exceed CHF 55,000 per year.
Income must be three times higher than the imputed costs. This results in a required income of more than 160,000 Swiss francs.
Visualization
Affordability Calculator
| Kalkulatorische Kosten | ||
|---|---|---|
| 1. Hypothek | CHF % p.a. | CHF |
|
2. Hypothek über 65% des Liegenschaftwerts | CHF % p.a. | CHF |
|
Amortisation der 2. Hypothek | CHF Jahre | CHF |
|
Unterhaltskosten der Liegenschaft | CHF % p.a. | CHF |
|
Nebenkosten der Liegenschaft | CHF % p.a. | CHF |
| Total Wohnkosten | CHF | |
| Einkommen | CHF | |
| Tragbarkeit | Wohnkosten / Einkommen | % |
The quickly account for a significant portion of the calculated housing costs. Those with more equity benefit disproportionately. On the one hand, monthly payments decrease significantly; on the other hand, credit scores improve. This, in turn, leads to better interest rates.
Mandatory amortization refers to the contractually required repayment of a portion of the Mortgage. In Switzerland, the so-called second Mortgage on owner-occupied residential property must generally be reduced to approximately two-thirds of the property’s value within 15 years or by the time of retirement. Mandatory amortization can be achieved either directly by repaying the Mortgage or indirectly through Pillar 3a. It serves to reduce the long-term risk for mortgage lenders and property owners.
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| Kurzfristige Hypotheken | |
|---|---|
| SARON Marge | 0.75 % |
| Fest 1 Jahr | 0.91 % |
| Fest 2 Jahre | 0.99 % |
| Fest 3 Jahre | 1.01 % |
| Fest 4 Jahre | 1.06 % |
| Mittelfristige Hypotheken | |
|---|---|
| Fest 5 Jahre | 1.11 % |
| Fest 6 Jahre | 1.17 % |
| Fest 7 Jahre | 1.16 % |
| Fest 8 Jahre | 1.21 % |
| Fest 9 Jahre | 1.27 % |
| Langfristige Hypotheken | |
|---|---|
| Fest 10 Jahre | 1.32 % |
| Fest 11 Jahre | 1.36 % |
| Fest 12 Jahre | 1.40 % |
| Fest 13 Jahre | 1.65 % |
| Fest 14 Jahre | 1.68 % |
| Fest 15 Jahre | 1.71 % |
Information on the best mortgage rates from HYPOTHEKE.ch
The rates on our Mortgage platform are updated hourly by our mortgage lenders. The “starting at” rates / top rates displayed here are offered by at least one provider on HYPOTHEKE.ch. These represent the best possible Mortgage interest rates currently available. Individual rates ready for closing depend on various parameters such as Loan-to-value ratio, Affordability, property value, region, and other factors, and may differ from the rates displayed here.
Guide
Maximum Mortgage
Anyone looking to secure a large Mortgage should take targeted steps to optimize their financial situation. Key factors include income, equity, Affordability, and choosing the right Mortgage lender. Banks, in particular, tend to have a Loan-to-value ratio that extends right up to the limit. Pension funds and insurance companies are generally much stricter and tend to take a more conservative approach to property valuation. So if you want to maximize your Mortgage amount, a bank is the right place to go.
Top Tips for Getting the Best Possible Mortgage
Conclusion
With good preparation and the right comparison, you can often significantly increase the amount of your Mortgage.
Frequently Asked Questions
Answers regarding the maximum Loan-to-value ratio
A mortgage with 100% financing is generally possible, but limited to exceptional cases—such as when there is significant assets, or an excellent credit rating. For most buyers, the maximum Mortgage is 80% of the property’s value; in some cases, it may be as high as 90%.
Not all mortgage lenders accept all types of assets as equity. It is therefore important to clarify this when financing is tight.
- Savings
- Securities
- Life insurance
- Gifts
- Pillar 3a
- Lot already purchased
- Loans (depending on terms and conditions)
- Pension fund (in part)
- Personal contributions (depending on the bank)
The loan-to-value ratio is the ratio of the mortgage amount to the property value.
Example
CHF 800,000 Mortgage
CHF 1 million property value
results in: 80% Loan-to-value ratio
It’s important to know that the loan-to-value ratio isn’t the same for all mortgage lenders. This is because they may apply different standards when appraising the property or use different appraisal tools. Differences of 10 percent can easily arise during the appraisal process. It’s therefore important to get quotes from as many mortgage lenders as possible.
The Mortgage must be repaid to a loan-to-value ratio of 65 percent within 15 years or by the time of retirement.
Depending on the individual circumstances, mortgage lenders may also require faster Amortization or higher monthly payments. Those nearing retirement are generally well advised to set their Mortgage at a maximum of 65 percent of the property’s value. Read more here: Mortgage Amortization and Retirement
Rule of thumb
max. 33% of gross income
Every mortgage lender calculates differently. It can therefore be worthwhile to get as many offers as possible. If a mortgage lender’s calculations are favorable for your personal situation, you may qualify for a higher Mortgage and/or your credit rating may improve. This results in better interest rates.
Learn more here: Better interest rates through credit score optimization
Calculated housing costs are the theoretical costs of a property that mortgage lenders use for affordability calculations. Mortgage lenders deliberately do not use the current mortgage interest rates, but rather significantly higher imputed interest rates, typically ranging from 4.5 to 5 percent. Added to this are Maintenance costs, Ancillary costs, and any Amortization payments. Banks use this calculation to assess whether financing will remain affordable in the long term, even if interest rates rise in the future. As a general rule, imputed housing costs should not exceed about one-third of one’s income.
Whether this is possible depends on the individual case—the key factors are income, age, and the value of the property.
Not all mortgage lenders go all the way when increasing an existing Mortgage.
Don't forget
As you get older, it becomes significantly more difficult to increase your Mortgage amount. For many people, it is therefore a good idea not to pay down the Mortgage too quickly or to draw up a clear long-term financial plan in advance. Read more here: Mortgages and Retirement
It’s rarely possible to secure a large Mortgage later in life. As people age, their income decreases due to retirement—while mortgage lenders’ requirements become more stringent.
Read more here: Mortgages and Retirement
If the property value drops, the Loan-to-value ratio automatically increases—with unpleasant consequences: Additional financing may become necessary, and the deteriorates noticeably.
In practice, real estate prices must decline noticeably over an extended period before mortgage lenders take action. In many cases, a good solution can be found with mortgage lenders. Particularly during the term of the mortgage, the risk that refinancing will be necessary due to falling real estate prices is low. This is also because real estate prices have been rising for a long time and a “safety margin” exists.
Your negotiating position when taking out a Mortgage describes how strong your starting position is vis-à-vis a Mortgage lender. The better your creditworthiness—that is, your Mortgage credit rating (Affordability, Loan-to-value ratio, etc.)—the greater your negotiating leverage typically is. However, having comparable alternatives is particularly important. If you can present several binding offers from banks, insurance companies, or Pension funds, you increase competitive pressure and significantly improve your negotiating position when taking out a Mortgage. With mortgage comparison platforms such as HYPOTHEKE.ch, you can now compare the best online mortgages and apply for them directly.
The best way to determine the maximum Mortgage amount for your situation is through personalized calculations, comparing multiple lenders, and developing a clear financial strategy—supplemented by skillful negotiation and the use of mortgage platforms.
make the search for the best Mortgage more efficient. Once you enter your information, you can see at a glance which Mortgage lenders are willing to grant you a Mortgage.
An online mortgage platform allows you to calculate mortgage rates digitally, compare mortgages, and, depending on the provider, apply for one directly. The advantages include transparency, a wide selection of providers, and the ability to quickly compare mortgage rates. This transparency also helps ensure low interest rates. Would you like to get the best interest rates on your Mortgage? Use our tool:
High Mortgage
Differences Between Mortgage Lenders
An often-overlooked point: Every mortgage lender calculates differently.
There are differences, for example, in
- Income Assessment (Gross vs. Net)
- Inclusion of income (part-time, self-employment, etc.)
- Inclusion of bonuses
- Affordability (33% versus 35% or even significantly more)
- Property valuation
- Calculation of maintenance costs
- Inclusion of Assets in the Affordability Assessment
There are countless other factors that mortgage lenders evaluate differently. HYPOTHEKE.ch analyzes more than 250 criteria to help you find the best possible offer.
Enter your personal information and find out right away what your options are: