can somebody share experience and knowledge with regards to the fixed term mortgages, few days back I was talking with one provider and they mentioned special conditions like
in case of temporary move (for example work related) from switzerland during the mortgage term, it has to be repaid fully with interest for the whole term
the same in case of selling the real estate, the mortgage can’t be transferred to the new property and has to be repaid fully
and something similar in case of death of the borrower in case it is on a single name
also from what I understood early repayment is not really possible, interests have to be paid for the whole term
is it something common? or can vary between providers or can be negotiated with the same provider?
You can and you should ask for the sample contract. This is something that many don’t do.
Die meisten Hypothekarnehmer sehen den schriftlichen Vertrag wohl erst ganz am Schluss des Verhandlungsprozesses. Man sollte jedoch bereits am Anfang einen Mustervertrag verlangen, damit man allfällige Fragen im Voraus klären und Unklarheiten beseitigen kann. Oft unterscheiden sich die Verträge in der Ausgestaltung stark. Sie sind vielfach einseitig zu Gunsten des Kapitalgebers ausgestaltet, andere sind hingegen kundenfreundlich und transparent formuliert.
UBS also sent their newsletter today and they don’t see rates going lower than 0.25, let s see who is right lol. I also expect negative rates in the near future given the mess in the EU.
in case of temporary move (for example work related) from switzerland during the mortgage term, it has to be repaid fully with interest for the whole term
In general if your conditions or market conditions change drastically they can ask you to repay the mortgage or increase equity. I guess that’s on a case by case basis.
the same in case of selling the real estate, the mortgage can’t be transferred to the new property and has to be repaid fully
You can transfer a mortgage to a new property or a new person (i.e. you sell the house with the mortgage) as long as you keep the same conditions and principal. Some banks may not allow this but this is possible.
and something similar in case of death of the borrower in case it is on a single name
If you have to sell the house then yes you need to repay the mortgage.
also from what I understood early repayment is not really possible, interests have to be paid for the whole term
The bank calculates so called early repayment charges, those are based on the delta between the mortgage interest rate and the current market rate. If your rate is lot higher than the current rate this can be pricy, on the other hand if your rate is a lot lower the bank may have to actually pay you money.
is it something common? or can vary between providers or can be negotiated with the same provider?
The fact that you need to repay if you sell and noone is there to take over the mortgage is a given however transferability may be agreed contractually upon from the start. If you are not sure how long you re going to stay in CH just take a SARON and you keep your flexibility. Early repayment charges with a SARON (if any) are usually a fix price in the range 1000 - 2000 CHF.
I think there’s a fairly good chance that rates will go lower or even negative. We already saw before the flight to safe-havens and this might happen again.
The SNB has now tried to avoid negative rates in the future by getting ahead of it and cutting by 50bps now, but I’m not convinced that it is enough.
Depending on the terms, the lender may allow you to transfer to the mortgage to the new buyers.
For example, if you locked in rates at say 1.0% and the current fixed rate is 2% then:
a) the buyers might be interested in this fixed mortgage
b) the bank would likely not charge and cancellation penalties since it’s below market even if the buyers wanted to use another lender.
of course in the reverse scenario you either need to pay penalties to the lender, or give the buyer a discount on the purchase price to compensate for the “expensive” mortgage vs. current rates
Personally I have 1/2 SARON and 1/2 fixed under 1% and plan to never sell.
and that also gives me flexibility to amortize portions of the SARON if I so choose.
the UBS research team proved to be to conservative with their baseline scenario now for multiple times. Given the economic climate and the SNB’s actions, I believe 0 or negative is actually quite possible.
Yes indeed the IRS market has not moved after the last rate cut that was already priced. We’ll have to see the inflation / growth reports to know if more rate cuts than already priced in (market is pricing one more with a 2y IRS at 0.15%) are coming.
Not much change, but signs of un-inversion: longer end is ticking up and shorter end seems lower.
This seems to match with the view that Fed might cut rates, but that bond holders would view this as inflationary and long bond yields will rise as a result.
Yup on their way back up. I suspected we’d reached a local minimum. I guess this will be on its way up until the next event.
I do think there will be some ‘bad event’ which leads to big rate cuts again. However, said ‘bad event’ might also heavily curtail lending making it hard to get mortgages or at least mortgages with good rates. That’s why I decided to fix for 10 years in 2024 and secure financing before any black swan events hit.
The SWAP rate appears to be more influenced by the US economy compared to the SARON. It seems we are reaching a tipping point where the SARON is becoming the preferred option for mortgages over a 10-year fixed rate…
so, for someone who is new and is looking for a mortgage, what is consensus right now? We just bought a house and are currently locked into a “construction” mortgage until October at 1.7%
From here until then, we can secure a fixed rate mortgage at anytime. We gambled and didnt fix the rate back in december when it was 1.29% and now its back up to 1.5 with our bank. Do you think it will go up and we should fix it at 1.5 today or wait till it drops again?
For reference, this is all based in 10 year fixed rate
No consensus at all on this topic. 85% of people taxe a fixed mortgage when they buy or renew.
4 last decades shows SARON is cheaper 85% of time. So it depends your risk tolerance and situation
To me fixed is like an insurance, most of the time you loose but sometimes it can really save you from a bad situation
You can also split it into 50% fixed-rate and 50% SARON (or whatever % you like), and switch the SARON to a fixed-rate matching the other tranche maturity when/if the rate looks good to you.
are currently locked into a “construction” mortgage until October at 1.7%
Where did you get such a rate if you don’t mind? I couldn’t find anything that wasn’t at least 1%p higher so far.
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