Hey,
I have a doubt.
I am shopping for mortgages and I have been offered by the same bank a Saron margin X if I sign a contract for up to 5 years and a margin Y<X if I instead commit for 5-10 years.
What would be the downsides of choosing the cheaper but longer contract? I assume the Saron margin cannot change during the contract, right? I would also have the chance to change to fixed any time and I won’t be able/willing to repay the mortgage within 10 years.
Thanks for your inputs!
G
Is there any risk that you may want or need to sell the object within 10 years? If so, what would be the penalty for early termination (if you can’t transfer the mortgage to the new owner or a new house)? Is the lower SARON markup worth that risk?
Keep in mind that the bank knows that you can’t choose another bank within those 10 years, i.e., don’t expect the best fixed rate if you were to switch from SARON to fixed.
Both comments make lots of sense, thanks.
I know credit agricole (next bank) offers Saron for 2 years, that’s the shortest contract period I know of in CH. With SARON you cannot have refinancing penalties since it’s based on money market rates thus I’m curious what penalties would you have to pay if you were to repay your mortgage tranche before maturity on a 10 year contract ?
You can choose 1y with a lot of banks. Or choosing an open-end Saron mortgage with 1 month notice period.
You don’t mean here “variable mortgage”, which seems to be a completely different animal?
No, “variable mortgage” is another thing.
There are two Saron mortgage types: the one with a specific contract lenght (1-10 years; you can switch into a fixed mortgage within couple of days, by end of the next quarter etc.etc (depends on the provider)) and there is a open-end contract length; as long you are not terminating the Saron mortgage, it is active.
It is very similar to the “variable mortgage”, but it is not, since for the variable mortage a fixed interest rate is used. The interest rate of the Saron mortgage can vary.
Some financial institutions are offering the framework-Saron, others are offering the open-end type.
For example, Banque Cantonale de Genève offers an open-end SARON mortgage with 1 month’s notice for the end of the period (quarterly) .
I am currently contemplating a real estate purchase and Migros Bank offers Saron that you can terminate with a 6 months notice. The margin is nice as well (0.65%) 
I would advise you against fixing a long term Saron contract, since IMHO the whole point about the Saron is to profit from its flexibility.
Can you be more specific? I see Migros bank advertising 0.8% margin online.
I just updated my previous comment with the margin they offer to me.
Should you get better margins somewhere else, feel free to share
Fully agree to that! I was offered a +0.6% margin SARON on a 1 month notice per quarters end a few weeks ago (BEKB)