About to buy a flat, need help with the mortage

Real Estate
21

That is indeed a nice price for a new flat in Zurich of this size and with parking and lake view. I applied to rent a bit smaller flat (90 sqm) in Wollishoffen some time ago and the rent would be 3000+300.

I’ve also got similar income and savings, just that I have no kid and no mrs, only a gf, with whom I would not risk taking a mortgage together. For a family with a kid it’s for sure comforting to have a place you call your own.

My boss himself has had a libor (saron) mortgage for years and he works for banks and in mortgage business, and he recommended me this kind of loan. He said you can get 0.7% or even lower.

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22

Nobody knows. 10 years fixed mortgages could go up to 1.5-2.0% and saron could stay where it’s now, like 2016-2018.

I would always go for saron. Longterm you’ll pay the least interest because it will be always lower than current fixed rate mortgages.

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23

Just my 2 cents, I would only echo what Patirou says about the problem with the downpayment in newbuilding contracts. Mind you that until delivered you have no rights on the building which means that in case of bankruptcy you will probably lose the downpayment; friend of mine had this issue last year here… So even though currently is a sellers market try to negotiate to pay as low as possible and as late as possible. In addition, make sure to see who are you paying, preferably ask them to pay to the entity making the construction and not some random entity they may have set up to market the apartments. Last, if I were you I would even try to ask some financial statements of the company to assess their condition; at the end of the end you are in essence “lending” them money…

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24

hypotheke.ch shows an offer for 0.45% for a libor/saron mortgage.

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25

Yes, probably the top interest rates.
For my clients with top notch rating I can set up such rates - at the moment.

Referring to the starting point of original poster and the current market situation, the rates won’t be in this section (don’t get me wrong, his financial starting point looks solid).

Since not every bank is calculating with 5% calc. interest rates (some are calculating even with 6%, others with 4.25% and for the maintenance costs there is a bandwidth, too), he should get various offers. By himself or by a broker who knows the real estate market well.

In the end, everything should be negotiated.

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26

Is this really that easy? I guess in that case everybody will go for Saron… Another point which makes all the decisions even harder :(.

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27

It is the case the majority of the time.

Term risk is a compensated risk and you provide the compensation for that risk if you take on longer term debt.

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28

Well not everybody. Some people want more security and a fixed budget for housing. But security costs money.

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29

I heard that once the saron rate starts going up, you could fix your mortgage. Of course this smells a bit like timing the market. But if you benefit from a lower variable rate for years and end up with a slightly higher fixed rate than you would get now, you’re still better off.

But there is some comfort in locking in a low fixed rate for the next 15 years. I mean, 1% is really not high.

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30

Just on a side note, and because nobody else mentioned it: Never make any plans including future bonus payments. The bonus can be gone in a heartbeat if your employers change their minds. It is a purely optional payment.

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31

Yes, and you have to pay the term risk premium of the other party if you do that. There is nothing wrong with that.

You won’t be able to do that. If the saron rate starts going up, then that will already be priced in in your fixed term mortgage.

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32

Thanks to everyone for the many replies! Already helped a lot!

Based on your answers, @Cortana @xerox5003 you seem to work in that field, so I am wondering, what would you do If you where in my shoes?

→ What structure / plan would you suggest me if I where your customer?
→ How much would you require in cash (minimum), what would you accept to be pledged?
→ And if I got you right, you would put the rest in a SARON-mortage?
→ Which bank/institutions would you look up first? Can you give me a shortlist?
->I would have to pay 20% this fall and the rest early 2024, but the bank has to confirm that they will come up for the mortage, how does that work since its more than 2 years upfront. How do you handle such cases?

And my last question wasn’t answered so far:

Has anyone experienced the situation where he wanted to extend his mortage while FIREd? Was it possible or a pain in the ass?

33

The fixed rate is always a bit higher than the current saron rate. So if you enjoyed lower rate for 5 years and then it goes up and you fix it, even if it’s higher you still end up st least not worse off.

34

Yes, but if rates go up, saron is still expected to be cheaper than a fixed rate then.

35

Well for my extension of my mortgage SARON would have been 0.1% more expensive. So I happily took the 0.69% 5 year fixed offer.

36

Might also be just a temporarly increase. You make a fixed-rate mortgage at 1.5-2% assuming that interest rates will keep going up only to find out 2 years later that they are back to the old level. It’s very close to market timing.

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37

Fixed rate loan has the insurance against interest rate fluctuation priced in. You could as well sign up a fixed rate loan at 1% for 15 years and then saron goes up to 3% and you won. Or it can stay near zero and you will regret…

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38

Most people were extremely excited when they could make a 10 year fixed mortgage at 2.7-2.9% a couple of years ago. Turned into regret only a year or two later.

Who knows? Maybe you’ll get interest from the bank when taking out a mortgage in 4-5 years? Sounds bizarre, but I think it’s possible.

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39

In Denmark mortgages with negative rates are already available for a couple of years.

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40

This exist in Switzerland but under strict conditions.

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