SARON 0.6% vs Fix Mortgage 0.86%

Hi everyone!

Would you do a SARON mortgage at 0,6% or a 10 years fixed at 0,86%?

10yrs fix cause with the FED tapering interest rates will go higher.

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10 years fixed at 0.86 is a very good rate. I would not take the risk of Saron movements for this rate.

Can we ask which bank offered this? I recently got a mortgage no bank offered me this low. Ended up signing at 1%.

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If it were that obvious the current interest rates for mortgages would already reflect it.

Saron will save you money longterm.

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If we assume the SARON rate remains constant over 10 years, what would the difference with the 10 year fixed rate be in terms of CHF value, per year and over the whole mortgage period? can help you to decide.
The best rate we got offered just before COVID was 0.70% for 10 years (renewal). 0.86% seems to be a good rate nowadays.

If you look at the forwards they price in an increase of interest rates. Fed even already announced that. Paying 26bps more but having for 10yrs the safety is better than the risk you take with Saron

Tell that to the poeple that always chose fixed rate mortgages in the last 30 years.

As long as the SNB doesn’t change it’s policy, your Saron rate will stay constant. I just don’t see it ever going above 0% anymore. Might stay like that for another 20 years (see Japan).

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I’d argue that the bank also has made a risk assessment; 26bp is enough to ofset their risks.

Personally, I’d go with SARON because of limited risks and much greater flexibility.

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0.6% (UBS)
1 month: 380.-
1 year: 4560.-
10 years: 45600.-
Better 3a, useful for the pledged 3a and the indirect amortization

0,86% (Migros Bank)
1 month: 544.77
1 year: 6536.-
10 years: 65360.-
Worse 3a than UBS

@lorenzogm Where di you get that? The best I got it’s 0.93% for 9 years with SwissLife (if you buy their life 3a…) and 0.99% for 9 years with UBS.

I would like to point out that the lowest interest, the best for what you need to pay to the bank, but then if it’s too low, you may pay more taxes.

With a higher mortgage interest rate, your taxes are reduced by the marginal tax rate multiplied by the increase in interest. However, the marginal tax rate is always a lot less than 100%, so it doesn’t make sense to pay a higher mortgage interest rate just to save taxes.

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I don’t expect the interest environment to change to much, but personally I would still go with the 10-year fixed-rate mortgage because I like being able to plan ahead.

I’ve seen 10-year FRM rates of 0.75% at pension funds (the Bernische Lehrerversicherungskasse, in this case). So I would definitely recommend shopping around a bit more because you will be tied in for 10 years and the small difference can add up to a lot.

If you prefer a bank, Avantage Service (BCGE) quotes its lowest 10-year FRM at 0.84%, and that’s the lowest available as per this comparison (which does not include pension funds):

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I agree that in general is better a lower interest rate, but it also depends.
If renting the house would be 3k/month and let’s say they calculate 60% of it (valore locativo), that’s CHF 21600 per year.
If the interest you have to pay to the bank are lower than that, then your total income will increase, with the result of paying more taxes

If the interest rate is lower, you always pay less in total (bank + taxes). I.e. assuming everything else is the same, a lower interest rate is always better, independent of your tax bracket. Or am I missing something?

If your interest and other deductible expenses amount to less than the taxed rental value, you pay more taxes than if you didn’t own any real estate at all. This may be interesting e.g. when comparing the cost of owning real estate vs. renting. However, it’s irrelevant if you’ve already decided that you want to buy a particular real estate object and are just shopping for mortgages.

Exactly

True :slight_smile:

Before 2008 it went to 3% and in 2000 was even more.
Do you think it’s not going to happen another big crash market in the next 10 years?
This kind of economy is not sustainable forever. I don’t think the S&P ATH for so many years and the huge American debt + trillions in stimulus, are healthy.

@Cortana Changing slightly subject, is in your opinion indirect amortisation with UBS (Vita invest 100 World) still a better option than direct amortisation and use Viac/FinPension?

Yes, or Vitainvest 100 Passive (0.90% total TER, btw newly available since this summer) for that matter. Lets say you are able to save 20k/year and need to amortisize 6.8k/year. Now you have to options:

A) Direct amortization. Save 0.60-0.90%/year on interest (or less after taxes) and invest 6.8k/year in Viac/Finpension and 6.4k/year IBKR.

B) Indirect amortitation. Invest 6.8k/year in the banks 3a investment solution and 13.2k/year in IBKR.

While the banks 3a will have a higher TER (0.90% compared to 0.45%), you’ll end up with more money when chosing B.

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The Vitainvest 100 Passive is pretty new, and not even in UBS they could tell me the TER…but I found this one:

So actually it seems cheaper that 0.90%

And for world 100 actually the TER is 1.61%, but I’m not sure how to consider the other expenses

You can see the fees in the last page of this document: https://www.ubs.com/2/e/files/2247646vbgfch.pdf

Sorry, but class Q is for qualified investors. Or do I miss something?

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