Buying your own house or apartment constitutes a substantial investment. You only have to put down a small share of the purchase price in most cases the larger share is covered by a mortgage. In order to allow you to enjoy your own home with peace of mind, there are important rules which need to be followed for sound financing.
The following topics will help you acquaint yourself with the financial conditions and to calculate the figures for your specific case:
1. Establish amount of equity and borrowed capital
The financing for your dream house or your dream apartment generally consists of a combination of equity and borrowed capital.
Typically, the equity you put down will consist of money from your savings, capital from your company and private pension schemes (pillars 2 and 3), inheritance advances or money given to you as a gift. This is how you calculate the amount of equity required:
- The equity you put down (e.g. from your savings, pension fund or inheritance advance) must cover at least 20% of the property's value
- At least 10% of the property's value must be financed using equity which does not include funds from your company pension scheme
It is possible to finance up to 80% of the property's value by taking out mortgages:
- You can finance up to 67% of the property's value with a first mortgage. You are not required to amortize, i.e. pay off, this first mortgage.
- You can finance the remaining 13% of the property's value by taking out a second mortgage. You will pay back this second mortgage within a period of 15 years or by the time you retire.
Breakdown of the components
2. Ensure serviceability
The monthly costs which go towards your own home should account for no more than 33% of your gross income. These monthly costs include:
- Assumed interest rate on the mortgage: 5%
In order to ensure that you can keep up the payments to finance your own home when interest rates are high, the calculations used to establish the serviceability of your mortgage are based on an average long-term mortgage interest rate of 5%
For financing of more than two-thirds of the real estate value, the debt on two-thirds of the real estate value must be amortized in equal tranches (i.e. linearly) within a period of 15 years.
- Maintenance and ancillary costs: 1% of the property's value
Cost of homeownership of total income (gross)
3. Calculate the figures
By entering your equity and gross annual income into the mortgage calculator, you can find out whether or not you are currently able to afford your own home.
The UBS mortgage app provides you with access to the mortgage calculator anywhere and at any time. It lets you save your data and transfer it to us to be used for an advisory consultation.
Further information on financing your own house or apartment can be found in our Financing with UBS brochure.
Arrange a personal consultation so that together we can analyze the composition of your equity, the options available for an early withdrawal from / pledging of your pillars 2 and 3, as well as direct and indirect mortgage repayment.