Debt-to-income ratio
Ratio of mortgage charges to gross income.
The debt-to-income ratio measures the share of gross income dedicated to mortgage charges. In Switzerland, it generally must not exceed 33% (one-third rule).
The calculation uses a theoretical rate of 5% (not the effective rate) to ensure the borrower could sustain a rate increase.
Included in the charges are: theoretical interest (5%), maintenance costs (1% of property value) and 2nd rank amortisation.
An excessive debt-to-income ratio is the main reason for mortgage application rejection.
Related terms
Affordability
Ability to sustain mortgage costs according to bank criteria.
Amortisation
Gradual repayment of the mortgage principal.
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