Kinda sad that you can borrow for about the same rate on IBKR!
Yes. But the banks use average while IBKR uses day rates, so it looks actually cheaper. Asked for formula for the average calculation, still waiting.
Is it 1.09% total rate or only the margin ? you can definitely find better than that if thatâs only the margin⊠Iâve never heard of averaged margin in the context of SARON mortgages, however the SARON base rate itself is a compounded rate over a given period which look like an averaged rate over that period.
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Yes, I was referring to the SARON compound rate.
Just signed the new contract at 0.89% margin.
Switzerland is beautiful because I almost pay no tax. But for the mortgage the taxable income is important, so many companies wouldnât even give me a mortgage. I could just pay it back, but the cash flow from investing that money into my dividend strategy is way higher than the interest I have to pay.
Here is the SARON compound interest calculator:
Der Zinssatz setzt sich aus dem fĂŒr die gewĂ€hlte Abrechnungsperiode massgebenden Compounded SARON zuzĂŒglich der oben aufgefĂŒhrten
Marge zusammen. Der Compounded SARON ist ein durch die SIX Group Ltd. festgelegter Zinssatz. Dieser wird von der SIX Group Ltd. nach
Massgabe der von ihr veröffentlichten Formel berechnet und publiziert. Zur Klarstellung wird festgehalten, dass der Compounded SARON fĂŒr
die Berechnung des Zinssatzes nie kleiner als Null sein kann.
Dividends are taxable income, no ?
Yes, but âmarket dividendsâ or capital gains are not. At the moment one can still deduct the interest on debt, we will have to vote on that soon.
I frequently use expletives but donât understand your use of the f-bomb in this case.
0,89 is not that bad in your situation. Is there a terms of 3 or 5 years or is it really flexible?
In the market for renewing our existing mortgage (5Y = 0.65%) and just received the following offer from our current mortgage lender (global bank):
Fixed:
- 5Y: 1.30 %
- 7Y: 1.44 %
- 10Y: 1.59 %
SARON:
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Normal SARON (indefinite term): 13 Months of cancellation notice period if you leave XXXXX or if you want to pay back a part or the whole amount / but if you want to transform it into a fixed one â this is possible at any time (immediate)
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Effective Normal SARON mortgage rate: between 0.2 â 0.25% + 0.8% = 1.00 â 1.05%
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SARON Flex (indefinite term): 1 Month cancellation if you leave XXXXX or if you want to pay back a part or the whole amount / but if you want to transform it into a fixed one â this is possible at any time (immediate) + Add on interest of 0.1% - which means:
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Effective SARON Flex mortgage rate: between 0.2 â 0.25% + 0.8% + 0.1% = 1.1 â 1.15%
OUTLOOK on SARON (XXXXX) â stable up until the end of 2026.
Would appreciate your feedback/critique. We need to make a decision by end Q2 at the latest. Thanks.
Nobody can advise you if you donât state your aims/goals etc.
UBS offered me 0.87% margin with the same terms. Had a cheaper from Banque cantonale de Geneve.
It is not a big amount and my taxable income is too low for most institutes to even give me a mortgage. I donât really need the mortgage, but finally signed with UBS, just because I donât want business with yet another financial company.
If I would hunt for cheaper rates I would ask pension funds and insurance companies, many of them offer SARON mortgages and they are not the target of the new capital requirements for banks.
Or, if you donât really need a mortgage, at the moment a margin loan in CHF from Interactive Brokers is cheaper than a SARON mortgage. But that will change when interests rise, as IB uses the daily SARON while banks use an average.
And also, the IBKR margin requirement can increase to any amount, at anytime. In case of a really big and negative major event with high economic uncertainty, you can get liquidated very fast.
Fair point.
Our long term goal is to regular FIRE by end-2033/beginning of 2034 (if all goes according to plan). We will continue to stay in CH for the sake of the kids (5Y and 1Y) education. We have no plans to sell our current apartment for at least the next 12-13 years. Even if we sell after that, we plan to move to a comparatively low cost canton within CH.
One thing we would target just before pulling the FIRE plug is to try and fix the mortgage interest rate for a period of (preferably) 10Y so that there are no questions/issues/challenges/complications with any mortgage lender against our income after FIRE (to cover the mortgage).
The current mortgage is 910,000 CHF and in a single tranche (5Y @ 0.65%). We intend to keep it in a single tranche going ahead. Our objective was to go for a fixed rate (5Y - 10 Y) in case interest rates were 1% or less. Failing that, our next step was to go for a SARON mortgage, provided it was cheaper than 5Y rate at the time of switch and then to convert into a fix rate mortgage if interest rates for 5Y - 10Y durations fall to 1% or lower.
The apartment was bought at 1.1 mCHF and it has been valued just recently by Global Bank at 1.6 mCHF.
The offer from Global Bank also states that we can stop amortisation after renewal. Currently we are both indirectly amortising the full yearly allowance into our Pillar 3A accounts (also with Global Bank) invested into their passive index funds.
One slightly complicating factor at the moment is that my OH has been laid off and will be unemployed soon (not ideal timing). For the sake of transparency, we are disclosing that to all prospective lenders that we have met so far. As can be imagined, some lenders are less than thrilled at that prospect and therefore are slightly reluctant to consider us for a refinancing (even though my annual salary is enough to cover the mortgage requirements).
Global Bank is also aware of this and to their credit (so far), they have given us detailed information and the previously mentioned offer without any pre-conditions on this topic.
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Iâd take the 7 year now and then youâd be in a position to renew for 10 years just before FIREing.
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Just got an offer from Raiffeisen for 950K buying price, where I will put 35% down (so 630k mortgage).
(Saron 26.03. : 0.199213%, value from bank)
Saron 3 years : 0.9% margin so 1.099213%
Saron 5 years : 0.8% margin so 0.999213%
Fix 5 years : 1.6%
Fix 10 years : 2.04%
I have the feeling they want to push me to Saron somehow 
Edit: IBKR would be at 1.2%
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Same happens (and happened) to real estate backed loans. 4 decades without a bust doesnât mean there cannot be one. The most important difference: you can sell single stocks, but you cannot sell a room of your home.
We are now in the process of processing with the reservation agreement and the next steps.
I am monitoring the swap rates and they seem to be on a downward path again. Any idea how long do the banks take for it to reflect the downward trend in their interest rates?
Are you free to go with any lender? Does the seller have mortgages that must be transferred?
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Normally you can ask the bank for their current fixed rates every day. It is usually only valid for that day specific day, if you get a quote at 11:30am, itâs unlikely to be different at 15:00 unless something wild happens in the swap market that day. But that quote will typically be invalid the next day.
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Spread - Itâs sometimes hard to know what kind of margin they will add to the swap. When the rates went down in December, I noticed that some lenders didnât drop the by the same factor (they took more margin)
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Your best bet is to get pre-approved by multiple lenders, have direct contacts at those lenders so that you can quickly get a quote and sign if you think its the right time (because of point #2).
Make sure you understand all the terms and conditions too.
thatâs really subjective, one could argue the opposite since December. Nobody knows.
This is straight from GPT:
Market Conditions & Rate Trends
1. What is the current swap rate for my preferred fixed term (e.g., 2, 5, or 10 years)?
2. How does the current swap rate compare to recent trends (weekly/monthly movement)?
3. Are central banks expected to raise, hold, or cut interest rates in the near future?
4. How do market expectations for inflation and economic growth affect rate movements?
5. What are other financial institutions predicting about rate movements?
Risk vs. Reward
6. What is the spread between swap rates and fixed mortgage rates (i.e., bank margins)?
7. Would waiting longer potentially result in a better or worse fixed rate?
8. If swap rates increase, how much more would I pay in interest over the fixed term?
9. If swap rates decrease, what is my opportunity cost of locking in now?
10. Am I comfortable with the risk of rates rising further if I wait?
Personal & Financial Considerations
11. Can I afford my mortgage if interest rates rise further before I lock in?
12. How long do I plan to stay in this property (does a longer-term fix make sense)?
13. Would a variable or tracker mortgage be more cost-effective given rate trends?
14. Am I prioritizing stability (fixed) or potential savings (variable/floating)?
15. Does my lender offer a rate lock option, and how long is it valid?
Yes, I was comparing from the beginning of March and Iâve been closely seeing it for the last 2 weeks. But, as you said, never know - it might go up again.
Yes, it is a new construction and the seller hasnât mentioned any restrictions. He has recommended 2 banks though who have evaluated the property. But, I am checking with at least 2 other banks.
How would this work? You submit all the documents with the bank, let them validate it and then just wait for the right time? This will anyways not be too long a time window as we would need to do the notarisation.
Yes, just ask them for their no-obligation quote process including all terms and conditions and what documents they need. Itâs usually the same stuff, so getting quotes from different lenders isnât much work once you already have done it once already.
Iâve structured mine so that I have 1 SARON tranche + 1 FIXED tranche, and with my lender I can convert some or all of my SARON at any moment to a FIXED. If I ever want to do so I would make sure it matches the expiry of my current FIXED, so that I donât get handcuffed to the lender upon renewal if I ever end up with multiple fixed tranches. This way I have some flexibility to amortize the SARON portion anytime, or lock in more if the fixed rates are low (my current fixed tranche is under 1%). If you decided to do something similar you need to read the fine print of the SARON terms as well as many lenders are putting that under a duration lock as well.
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