I’ve an investment property where I’ve received an offer from Raiffeisen for a saron mortage with 0.8% margin. I’m currently hesitating whether to take it for the 3 or 5 year duration? What would you recommend. I thought 3 year gives me more flexibility in case I want to sell or get an even better deal at renewal in 3 years, but I thought 5 years on the other hand could be better in case margins are higher in 3 years and I delay the admin overhead for renewal for another 2 years as the margin of 0.8% is already decent. Would appreciate any perspectives on this as I’m new to this.
If you want flexibility, I would recommend taking out a one-year fixed-rate mortgage each year rather than a SARON mortgage with a three-year contract.
SARON mortgages with a fixed contract duration of more than three months are a trap.
agree 100% but almost all providers have moved to a 3 year duration unless you pay a premium on top to keep it open.
are there competitive rates for SARON with a flexible rolling contract?
It goes both ways: my 3-month SARON contract was recently changed from the bank side, which raised the margin. Had I picked the Raiffeisen SARON offer (fixed for 3 years, which I also saw as a drawback), I’d be paying 0.24% less right now…
I bought a property at an auction worth around 600k for 500k and got a loan of 450k from Raiffeisen, not sure whether UBS or any of the other banks would offer me that too at a similar margin with the flexibility. Also generally I’ve heard that margin might increase in the future due to Basel III so I’m thinking it might be not that bad to be “locked in” for 3 or 5 years, but I’m still unsure.
When and where did you manage to get this? Based on my research recently it has become really difficult to land such good deals (VIAC increased margin from 0.65% to 0.8%, Migros from 0.8% to 1% etc.)
UBS. No bargaining, no back and forth, just a good personal relationship with our banker. He understood our situation, did a detailed evaluation of our financial situation (investment assets, portfolio, etc.) and then made us an offer. We were happy with this and signed the contract. It did take a long time tho - approx. 4 months from start to finish.
I want to submit my application for my first mortgage with VIAC. I would like to ask about the current trends and your recommendations.
Would you suggest going for a fixed-rate mortgage or a money market (SARON) mortgage at the moment? Or perhaps a mix of different tranches would be better?
Additionally, I have a question to make sure I understand correctly: if the “Abschaffung Eigenmietwert“ comes into life, it will be more cost-effective to invest as much as possible at the start (as “Eigenkapital”), right?
Statistically you’ll generally pay less with a Saron mortgage in the long run and I would therefore recommend you to go with Saron if you’re financially flexible enough. If you’re tight on budget and/or could not stomach potential interest rate spikes and value the security, then go with a fixed-rate mortgage. Concerning the Eigenkapital I would recommend you to use as little Eigenkapital as possible as you can always invest your extra cash/Eigenkapital into the stock market which will yield a much higher return than the mortgage independent of any potential tax savings depending on the outcome of the initiative which will have a much smaller impact than having extra money invested at 5-10% per year.
Depends on you. SARON should be cheaper in the long run, but you’re exposed to risk. Fixed-term (like 10 years) give you certainty to plan for some time, but comes at a cost. Any (expected) “trend” will be priced in or pure luck due to timing.
Only relatively, and “cost-effective” is not the wording I’d use.
Say you’d get a mortgage at 1.5%, today, it might be a net 1%. Without tax deductions, 1.5% net would obviously be higher, but still relatively low in historic comparison. Again, depends, on your financial means and preferences and other alternatives to use that equity.
Yes, in the long term SARON will probably be cheaper. The mortgage increase shouldn’t be a big burden on our budget, so we will most likely go towards SARON. A potential increase in the interests by a few hundred francs per month is acceptable.
You are right regarding the “Eigenkapital”. I had only considered the possible tax costs and interest payments, but I didn’t think about that, that I could invest that money. I think it would be a good idea to add it to our retirement portfolio in a simple ETF, for example, ACWI.
If you have more tips or advice, please share them.
It can be up to 1k more each month or even more, in the most negative scenarios. But still, on the long term you will be paying less with SARON vs. fixed. It’s just about the capability to manage that potential cost for a specific period, knowing it’s still the cheapest scenario. Else, you just accept paying more for a fixed mortgage to avoid that risk. That being said, we went for SARON, but I took the fixed rate as reference at the time we took the mortgage, and I am saving the delta (current SARON vs. fixed we would have gotten back then) for ‘‘darker’’ times.
As always, this is one of the best threads I’ve come across on mortgages.
Finally, after 2 years of searching and bidding, we’ve now secured a property
I’m now actively exploring mortgage options. As I am a long-term, risk-tolerant investor with headroom for interest rate fluctuations, I am leaning toward going fully SARON-based.
I would also like to minimize how much equity (“Eigenkapital”) I put down, and use indirect amortization via a 3a investment vehicle. Both my partner and I have Pillar 3a with VIAC, which makes that feel like the obvious route. But the current numbers are discouraging: VIAC via margin is 0.80% for a 3-year lock-in , whereas Swissquote offers 0.55%.
From what I’ve read in this thread, it seems we won’t be able to pledge or amortize with 3a in our case. So I’m stuck without a strong option.
Where would you suggest I start looking, or what questions should I be asking next?
Loan repayments are determined by the bank and must be made quarterly in equal instalments. You may make indirect repayments via pension assets (Pillar 3 with Luzerner Kantonalbank).
A linked account will be opened with Luzerner Kantonalbank for the purposes of debiting interest and repayments and handling the mortgage. It is the client’s responsibility to ensure that funds for interest and repayments are provided on time. The linked account must not be used to invest liquidity. LUKB is entitled to charge liquidity holding fees (negative interest) if the product is used in any other way
So worth checking the terms and compare the (probably worse) product of LUKB with the better margin compared to VIAC with worse margin.
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, whereas Swissquote offers 0.55%.