Mortgage to fix now?

Real Estate
1

Hello folks,

I bought a flat that is planned to be finished by July 2022. would you fix a loan now or wait still? Can get now a 10yr loan for 0.9% if I fix it. Pay a forward of 7bps but the risk is that the house might be finished later and interest rates go even lower. Any thoughts ? Thanks

2

0.9% is an excellent rate, I would go for it. I don’t know the term “bps”, what does it mean ? This could change my mind.

A few questions to ask yourself:

  • How much lower can the rates reasonably go ?
  • Is it more likely to go down or up ?
  • Which will you regret more: having 0.9% instead of 0.5 or 1.4% instead of 0.9% ?
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3

But what happens if there is a delay in the construction and it is not finished in July 2022 but more Okt 2022. would you still fix it now for next year?

4

Bps = base points, 7bps =0.07%

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5

I believe that the rates cannot go much lower and with time they are more likely to go up
0.9% for 10 years is a pretty good deal. I haven’t seen such prices.

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6

10 years 0.90% including forward is a great deal, take it.

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7

I agree with the other members, good rate.
What about direct/indirect amortization ?

8

The 0.9% is great, 10 years is long though…

9

Both options possible. Would you go with the indirect? Why do you think the 10yrs are too long?

10

I can confirm that it is a good deal too. Recently I got 1.11% and accepted it ;).

11

If you have a solid work/life situation there is simply no point in signing up for 10years. Just renew every 5 instead and save some money with the lower rates.

12

But rates can also go higher. This is why I think to go rather with 10yrs and not 5yrs. But can be wrong as well

13

That’s why I will go for SARON and not a fix one. Already lost so much money fixing it for 10 years… :frowning:

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14

It’s the same gamble that the bank takes, and they only hand out 10 years at those rates because they calculate the likelyhood for interests raising over that rate as unlikely.

15

Renewed my mortgage a few months ago with 0,9% for 10 years and feel comfortable. As I remember correctly Migrosbank would offer unofficially even 20 years.

16

I didn’t want to imply that it is too long; it is really dependent on your personal situation and preferences. It is just that it is a long period, that is hard to oversee from most perspectives.

17

0.9% is indeed a good rate for 10 years. Nevertheless, given the current rate environment which is likely to stay negative/very low, I’d consider a flexible SARON-based mortgage. I have to renew mine next year and will definitely not go with a fixed term anymore. You can get way better rates for SARON mortgages and if rates trend upwards again, you can still consider cancelling it and switch to fixed term. Check out the many online platforms like Moneypark, Key4, Valuu, etc.

18

Also an interesting way to look at it. How much do you currently pay with your Saron rate? 0.5%?

19

If you fix the rate now, you will have the risk of delays. If they delay the construction, you will start paying before you move I remember. If they finish faster, you will need to take another loan with a high interest rate to cover those months. Not sure if there would be any insurance for this…check with the bank to get all conditions and risks and what ifs.

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20

Me personally I would just go with Saron. You’ll end up with the lowest paid interest longterm. Fixing a rate is security, security costs money.

You pay with volatility. Similiar to stocks.

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