Different ways to calculate affordability when buy-to-rent second property

Real Estate
1

I am recently in this topic and noticed. Unlike calculating affordability for the first property to live is almost same everywhere in Switzerland, there are different ways to calculate affordability when buy-to-rent second property across different banks and/or even different employees in the same banks. Let me list three way. So here the question is, do you know any bank that go with the best way, the third way.

First let’s define some terms.

  • INCOME_F: our family income
  • COST_1: the interest cost and maintenance cost of the first property we purchased and now lived in
  • COST_2: interest cost and maintenance cos of the second property we are going to purchase
  • INCOME_2: net rent income of the second property we are going to purchase and rent out

so here are the different ways to calculate affordability.

way #1 affordability = (COST_1 + COST_2) / (INCOME_F + INCOME_2)
way #2 affordability = (COST_1 + COST_2 - INCOME_2) / INCOME_F
way #3 affordability = (COST_2 - INCOME_2) / (INCOME_F - COST_1)

simple math can show that way #3 always give the smallest number and therefore the most favorable to me. I know for example moneypark uses way#2 to calculate and zkb (limited to some agent, not sure why) uses the way #3.

I hope if someone can point me some banks, mortgage agents who go with way #3. Or maybe I am wrong? Maybe it is way #3 in all the banks? That will be the best scenario.

2

When I bought my second property, the bank didn’t really look at the cost of the actual place. The affordability was just look at the current case.

3

thank you so much for the reply.

I am not sure I understand your word. Cost of the actual place means the interest cost and maintenance cost of the 2nd property? and current case means the interest cost and maintennance cost of the 1st property?

4

Sorry. My situation was a bit different. I have rented my first apartment → Actual place.
Current case → 2nd property to purchase.

The bank mainly didn’t take the 1st mortgage in to the game, but advice so sell it as the total mortgage is over 2 millions.

Cost actual place. mortgage + expenses.they also didn’t calculated in the total income.