Glossary
Affordability
A bank check intended to ensure that the borrower can sustainably bear the costs associated with the property, including if interest rates rise. The calculation adds together mortgage interest assessed at a notional rate of around 5%, well above the market rate, mandatory amortisation and flat-rate maintenance costs, often estimated at 1% of the property's value.
The total should generally not exceed one third of the household's sustainable gross income. Each lender retains its own method and may apply stricter criteria. It is this test, and not the rate actually offered, that determines the amount that can be financed: a low market rate improves monthly cash flow without changing the bank's calculation. In expensive markets such as Geneva, affordability blocks more applications than insufficient equity.
