For many people, owning their own home is an integral part of their life plan. In most cases, a mortgage is needed to finance the property. Getting a mortgage is possible in the classic way through a bank or also online through websites such as e-hypo.ch. Either way, it is worth comparing the conditions and observing the development of interest rates.
Different types of mortgages
For the financing, three types of mortgages are common in Switzerland: the fixed mortgage, the rollover mortgage (or LIBOR mortgage) and the variable mortgage. With the fixed mortgage, the interest rates are fixed, that means that the interest rate remains unchanged over the entire term. In general, a term can last between two and ten years. Because of their fixed interest rates, fixed mortgages are well suited to people with regular and constant earnings.
With the rollover mortgage, also known as a LIBOR mortgage, the interest rate is not fixed but will be adjusted to a reference interest rate, the LIBOR – London Interbank Offered Rate – at regular intervals. This interest rate will be adjusted by the bank at intervals of three, six, nine or twelve months. The term for a rollover mortgage is mostly between two to five years. This type of mortgage is similar to the variable mortgage and optimal for clients who want something middle of the road between security and flexibility.
The variable mortgage in contrast has no fixed term. The interest rates are adapted by the bank at regular intervals. They are guided by the usual market interest rates. Although the client lacks the long-term planning security, they can benefit from a low or decreasing interest rate level. When interest rates increase, however, so do the costs of the mortgage. It is common practice with variable mortgages that they can generally be terminated within six months.
It is worth comparing interest rates
Regardless of the type of mortgage you decide on, two elements are key: the interest rates and the term. Given that the level of the interest rates eventually determines the effective costs of the mortgage, it is worth comparing them. Another important criterion regarding the level of the interest rates is the loan, which shows how high the market value of the property is in comparison with the mortgage amount. The higher the proportion of own equity is, the lower the loan, which has a positive effect on the interest rate for the mortgage.
Choose the right term
The second important element of financing your own home is choosing the term. Because in the most cases, the mortgage amount will not be paid back, an extension of the mortgage is inevitable. Therefore you must choose a term, in order to benefit from the current but also prospective interest rates. Given that an extension of the mortgage, referring to the new interest rate, can be fixed much earlier, at this stage you should always keep an eye on the interest rate development.
Extend the mortgage online
Whether you get a mortgage through your bank advisor or online, either way it is worth comparing interest rates. Online you can benefit from particularly affordable conditions thanks to lower consulting fees. Some websites such as e-hypo.ch offer additional interest rate cuts. Request your individual offer!