The loan to value ratio (LTV) designates the externally financed portion (mortgage) in relation to the purchase price. LTV is typically given as a percentage, with the maximum lending ratio generally being 80%. Or to put it another way: assuming affordability is confirmed, up to 80% (in exceptional cases up to 90%) of the purchase price can be financed with a mortgage. So conversely, this means at least 20% of the purchase price must be provided as equity.
Example:
The purchase price for a property is CHF 1 million. The buyers provide CHF 200,000 as equity and take out a mortgage for CHF 800,000. So at the time of purchase, LTV is 80% (CHF 800,000 / CHF 1,000,000 x 100). If customers opt for direct amortisation, with the mortgage reducing year-on-year, the LTV also reduces year-on-year. As the market value of a property changes over the years, owners may ask the lender for a new assessment after a few years. If the market value has increased, the LTV reduces along with the amortisation obligation.