The mortgage provider will not lend you the full value
At least 20% of your assets must be your own.
When you apply for a mortgage to buy a home, the mortgage provider may not lend you the full value of the property. This is because most lenders have certain loan-to-value (LTV) ratio limits, which dictate the maximum percentage of the property’s value they are willing to lend. The LTV ratio is calculated by dividing the loan amount by the appraised value or purchase price of the property, whichever is lower.
For example, if a lender has an LTV limit of 80%, it means they will lend up to 80% of the property’s appraised value or purchase price, and you will need to cover the remaining 20% as a down payment.
Here is a very basic illustration with a CHF 1,000,000 property value.
Example
- Value House: CHF 1’000’000.-
- Minimum Equity: CHF 200’000.-
- 1st mortgage: CHF 650’000
- 2nd mortgage: CHF 150’000
