Your borrowing capacity is not a fixed figure: it is the result of a trade-off the bank makes between the risk it takes and your income. Four parameters drive this calculation. Understanding them keeps you from setting your sights on a property the financing will not follow.
Loan-to-value
The loan-to-value ratio (quotité) is the share of the price you borrow, the rest coming from your own funds. A ratio of 90% means a 10% down payment. The higher the ratio, the greater the risk for the bank: it passes this on through the interest rate, or refuses beyond a certain threshold. The National Bank expects banks to keep high loan-to-value ratios in check, more strictly still for an investment property than for one's own home.
Practical consequence: having a down payment widens the choice of properties and improves the terms.
The effort ratio
This is the share of your income that goes into the monthly payment each month. A widespread rule of thumb caps it at around a third of the household's net income, but this is not a law: the bank reasons above all in terms of remaining income to live on (reste à vivre), i.e. what is left once the monthly payment and fixed charges are paid. Two households on the same income do not have the same capacity if one already has other loans.
The down payment and the costs paid in cash
A point that is systematically underestimated: the acquisition costs — registration duties, deed costs, credit costs — are paid in cash, at the deed, and the bank rarely finances them. They therefore add to the down payment needed. Costing this total before looking for a property avoids nasty surprises at the moment of the offer.
The term
Lengthening the term of the loan reduces the monthly payment, thus improving the effort ratio — but increases the total cost paid over the life of the loan. It is a dial, not a free solution: gaining capacity through the term is paid for in accumulated interest.
From budget to the right price
Once your capacity is known, the question becomes: is that budget aiming at the top, the middle or the entry level of the market in the target municipality? Placing your envelope within the range of recent sales tells you which type of property is really within your reach, and saves you from wasting time on properties out of budget — or overpaying for an affordable one.