Turning your dream of owning a home into reality: How you can afford your own home

For Swiss families the most important reasons for wanting to own a home are greater flexibility as regards design, no conditions imposed by the landlord and more self-determination. But our latest study also shows that some Swiss families give up on their dream of owning a home or are committed renters. What are the reasons for this?

1. A lack of equity

Our study shows that 92 percent of the families surveyed simply have too little equity. Those who want to buy their dream home need to have at least 20 percent in equity. Of this amount, only half can come from a pension fund. For example, if you buy a property for CHF 1 million, you need to contribute CHF 200 000 of your own money. This is a large sum for families and young couples, one that often seems out of reach.

2. Lack of affordability

It is true that mortgages are now cheaper than ever: The interest rate on a ten-year fixed mortgage is just 1 percent. And yet many Swiss families, even with financial support from their parents and other relatives cannot afford an apartment or a house. How can this be?

The answer is simple: a lack of affordability. When making their calculations banks do not take account of the actual interest rate. Instead, they use a notional affordability interest rate of 5 percent. That way they can be sure the borrower will be able to afford the property even if interest rates rise sharply.

In addition, the ongoing costs of the property must amount to no more than a third of the gross household income in order to obtain a mortgage.

3. High real estate prices

Of those surveyed, 78 percent cited high real estate prices as a reason they are not interested in buying a home. Particularly in the canton of Zurich, prices often exceed CHF 2 million – which is simply not feasible for many families.

Additional reasons people choose not to buy a home include:

• The families are very satisfied with their current rental property
• They have not found a suitable mortgage
• They do not want to move because, for example, of their child’s school
• They have not found a property that meets their wishes
• The families have not found a property in the desired region or location
• There was a change in life situation, e.g. to their profession

And what if you simply cannot get the dream of home ownership out of your mind? Then we have some helpful tips for how you can get closer to owning your own home.

How can I afford a home?

Our tips:

• Scale back
  Do you really need five rooms? Do you absolutely need a large single-family home with a garden? Perhaps a terraced house with a small front yard is enough for you and your family.
• Look in the countryside
  Is your job flexible? Then it’s worth looking at properties outside the city. In many cases, these properties are a lot cheaper than those near the city centre. Check out the surrounding area at the weekend and look at other locations as well.
• Budget the down payment
  Properties generally can only be financed up to 80 percent with a mortgage. So you’ll need to budget at least 20 percent of your own equity. Such equity can, for example, come in the form of bank assets, the proceeds from the sale of securities, assets from the second or third pillar or prepayment of inheritance.
• Establish a savings plan
  Establish a savings plan that shows how much money you’ll need to set aside each month in order to reach your savings goal. According to our study, Swiss families save an average of eight years to buy a home.

By planning the financing early on it will be possible for you to realise your dream of home ownership and to live self-determined within your own four walls. Work towards your goal in a targeted manner. Look to your financial future with confidence – perhaps you’ll soon be enjoying life in your own home.