Advice while selecting real estate mortgage offers from banks

Dear Members,

I am in the closing stages of purchasing a property. The offer has been accepted. We are now looking at which bank can give us the best mortgage offer.

So far, we have contacted ubs, migros, blkb, bkb, cs

Migros bank has the best rates upto 5 years. They are offering the following:

2 Jahre 0,630%
3 Jahre 0,640%
4 Jahre 0,640%
5 Jahre 0,650%
6 Jahre 0,960%
7 Jahre 0,980%
8 Jahre 1,010%
9 Jahre 1,030%
10 Jahre 1,070%

BLKB is offering the below rates:

Festzinshypothek 1 Jahr: 0.73%
Festzinshypothek 2 Jahre: 0.71%
Festzinshypothek 3 Jahre: 0.69%
Festzinshypothek 4 Jahre: 0.60%
Festzinshypothek 5 Jahre: 0.79%
Festzinshypothek 6 Jahre: 0.83%
Festzinshypothek 7 Jahre: 0.87%
Festzinshypothek 8 Jahre: 0.91%
Festzinshypothek 9 Jahre: 0.94%
Festzinshypothek 10 Jahre: 0.97%

BKB, ubs and cs will supply the offer tomorrow.

I am looking for a medium term mortgage (say 5 - 6 years) on the full amount. I would prefer not to split up the mortgage into several tranches as this will drastically reduce flexibility when it comes to changing banks after a particular tranche expires.

Would be grateful if you could give your thoughts on the above offers and also on what could be a good structuring solution. Thanks in advance for your advice.

Migrosbank offers usually new clients a better rate for the frist 5 years (you see that in your chart), than it jumps a bit up. All in all the interest rates are on a all time low. All the banks have in the contract, even if the CHF interest rates would be -5% there is a max lowest rate for mortgages wouldb be around 0,8% (example with Migrosbank). Also Migrosbank offers a 20y mortgage inofficially.

I do have currently a LIBOR Festhypothek with aournd 0,8% with Migrosbank but probably will switch in into a 10y fix mortgage soon.

How long you want your fixed mortgage is mostly depending on your personal situation. I started with a 5y fixed Mortgage in 2010 with 4% and was happy to switch to a LIBOR in 2015. :slight_smile:

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Without the full picture on your cash reserve / how much equity you invest / your risk profile it’s difficult to tell whether doing only one tranche is a good idea. Sure you keep some flexibility but if in 3 to 5 years interest rates start raising and renewing the whole mortgage puts you in financial stress that might not be the best idea. Interest rates are historically low and if I was to take a mortgage today I’d look into longer maturities i.e. at least 15 years to be on the safe side. Sure you pay a premium for this but at least renewing the mortgage is no longer an issue. Swisslife offers such maturities for 40 basis points above what you got for 10 years.

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Thanks @OogieBoogie @HoiZame the price of the property is CHF 1.1 million and we are putting 221 KCHF (20%) as downpayment.

We have the option of either putting the entire 221 KCHF as cash or 190 KCHF as cash and then pledging our Pillar 3A accounts which are approximately 31 KCHF.

We would prefer to pledge our Pillar 3A accounts and not withdraw them as otherwise, we would end up paying withdrawal tax of approx. 1.1 KCHF on 31 KCHF (3.3 % in BS)

There is a bit of renovation work to be done on the property which should require around 40 KCHF. If we use our entire cash as down-payment, we would come close to reaching the end of our cash reserves and would then definitely have to withdraw the Pillar 3A accounts to pay for the renovation.

We just received an offer from a Kantonal bank in the past 30 mins for a 5 year fixed rate at 0.55%. They also offered to pledge our existing 3A accounts and thereby lower the amortisation required to 91 KCHF over 15 years. This works out to an effective outgoing of CHF 1,683 per month. Sounds quite attractive.

The reason why we dont want to go for a long term rate is because of the unknown factor of what might happen down the road. Sure, there is also a risk of renewing the mortgage at a higher rate.

Hi,

I agree with you on the 3A pledging, if you have the capacity to pay the extra interests on the debt do it, there’s a tax benefit for this move: 1. you don’t have to pay the wealth tax on the 3A assets 2. you can deduct the interests of the extra debt.

It depends on your definition of long term, to me that’s at least 15 years and I would say 5 years is rather short term. Did you try asking an offer to other financial institutions that offer such maturities ? I know Credit Agricole (ca next bank) does as well as insurance companies such as Swisslife. With Swisslife you can get up to 25 years provided that cash + pledged assets (2nd pillar + 3rd pillar) cover 35% of the debt. But I think that 15 years is already quite reasonable. For 15 years from the numbers I see the rate is about 1.2% which is of course a lot higher than 0.6% ^^, but again that depends on your risk profile and what you expect from the rate market in the coming 5 years (I would say chances are low that rates go a lot higher in this time frame but I don t have a crystal ball).

When you do the computation also keep in mind that if you pay more in interests, since you are able to deduct from taxes the actual cost is of course lower.

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