Is its affordability and therefore the financing already secured? Many congratulations, that means you are already very close to making your dream home a reality! Now you are spoiled for choice: which mortgage is the right one? What should you look out for and what are the actual differences?
In principle, there are three different types of mortgages. When deciding on a type however, a total of four factors play a role. Firstly, the personal willingness to take risks, secondly, the risk capacity, the current interest rate environment and last but not least, the development of interest rates. However, your personal situation should also be included: What are your career goals? What are your plans for having a family? Where do you see yourself working in five or ten years? The answers to these questions help to find the right mortgage type with the optimum term for you.
The three types of mortgage types at a glance:
| Variable mortgage | |
|---|---|
| Advantages | – Financial relief when interest – Possibility to change to another type at any time |
| Disadvantages | – Higher financial costs when interest rates increase |
| Your strategy | You value flexibility and individuality. |
| Fixed mortgage | |
|---|---|
| Advantages | – Fixed interest rate during the whole term – No further costs when interest rates increase – Precise and clear budgeting |
| Disadvantages | – Unchanged cost when interest rates decrease – Changing mortgage type during the fixed term is not possible |
| Your strategy | You are counting on interest rates increasing and would like a consistent interest charge over a longer term. |
| Tracker mortgage | |
|---|---|
| Advantages | – Interest rate cuts when interest rates fall – High transparency – Protection from increase in interest rates (with interest rate hedging) – Possibility to change products (without interest rate hedging) |
| Disadvantages | – Interest rate fluctuations are to be borne at one’s own discretion |
| Your strategy | You would like to benefit from low money market interest rates and protect yourself in a flexible manner from interest rate increases. |
You do not have to necessarily opt for a single type. It is also possible to combine several types with different terms and this is quite customary nowadays. The cheapest type of mortgage is not always the best! Choose the type that best accommodates the aforementioned factors. The St. Galler Kantonalbank mortgage comparison will help you choose the best solution: www.sgkb.ch/hypothekenvergleich.
