Pay back the mortgage, or invest the money instead?

The choice you should be probably making is whether to buy or not to buy, not whether to take a big mortgage or a small one.

If you will buy, need a mortgage now because you can’t cough up the whole price in cash, but you’re reasonably sure you’ll have the money, say, in 5-10 years, I still think at current rates it’s much better to go for as large as possible mortgage and repay it as late as possible. Just don’t put all the money that you’ve freed up with the mortgage into stocks then, as it’s far too risky. You can put your repayment money instead into pillar 2 or 3a and pocket huge tax benefits. Assuming, say, 35% marginal income tax rate, paying 5% tax on cash out in 10 years, you’re looking at 3% return per year from taxes alone + whatever interest your pension fund will also be paying, which is in total much better than 1.1%*(1-35%) savings in mortgage interest you’d have by repaying early

Another thing you need to consider is that fixed mortgages are really fixed in Switzerland. Unlike US, you can’t get out earlier without large penalties. So unless you’re sure you’ll live in the same place for 10 years, I wouldn’t commit to such a long mortgage.

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