How to find the right mortgage for you

May 20, 2020.

Many people dream of owning their own house or flat. But before your dream can come true, you need the right financing model and the right finance partner. Our experts’ tips can save you money, time and trouble.  

 

What financing models are available?

The following three models are the most common ones in Switzerland.

  • Fixed-rate mortgage: the interest rate and term are fixed when the mortgage is concluded.
  • Variable-rate mortgage: the interest rate varies in line with the market.
  • Money market mortgage (Libor): a cross between a fixed-rate and variable-rate mortgage.

 

In our mortgage guide you can find all the important information on these three financing models. In addition, our experts explain the advantages and disadvantages of pledging your pension fund or withdrawing money from pillar 3a. Our publication “Finally, a home of your own” is a comprehensive booklet about mortgages, created jointly with the consumer magazine “Beobachter”. Download it here for free. 

 

 

Which mortgage is right for me?

The answer to this question is very individual and depends on various factors.

 

Capital: how much capital can you provide as a down payment?

You must provide at least 20% of the purchase price of your property as a down payment. If you pledge your pension fund or take money from pillar 3a, you can increase your capital without having to use up all your savings. In this case, 10% of your down payment must come from your savings.

 

Income: will your income remain stable over the next few years?

If you are planning to start a family or get further education, you may want to reduce your working hours. If your income changes, the affordability of your home changes too. Your home may suddenly become too expensive. Mortgage lenders require that your housing costs (mortgage interest, amortisation and utilities) do not exceed one-third of your income.

 

Risk: how much risk are you willing or able to accept?

If you want to benefit from sharp drops in interest rates, you also have to be able to bear higher interest rates in return. A mortgage that adapts to the market is always risky. If you prefer to budget your expenses precisely and avoid fluctuations, the constant rate of a fixed-interest mortgage makes better sense for you.

“Past records show that for fixed-rate mortgages lasting more than 8 years, an insurance company is a better choice than a bank. At Generali, you can choose between variable-rate and fixed-rate mortgages with fair interest rates and flexible conditions.”

 

Christian Breutel, Director Real Estate & Mortgages

Bank or insurance company – which is the better mortgage provider for me?

The answer to this question depends on which financing model you prefer. If you want a fixed-rate mortgage, insurance companies frequently offer lower interest rates than banks. Depending on when and for how long you conclude a mortgage, the differences can be enormous. The last few years have shown that fixed mortgages with terms of over 8 years from insurers were often 0.2% to 0.3% cheaper than comparable offers from banks. At Generali, you can choose between variable-rate and fixed-rate mortgages with fair interest rates and flexible conditions.

 

For example:

Fixed-rate mortgage of CHF 500,000 with a term of 10 years.

 

Interest rates:

Large bank   1.05% = interest costs per year: CHF 5,250

Generali   0.90% = interest costs per year: CHF 4,500

 

Savings over 10 years = CHF 7,500

(Interest rates as of 28 February 2020)

 

If you opt for a fixed-rate mortgage with a short term or a Libor mortgage, you will probably get better offers from the banks. Additionally, many insurance companies (including Generali) do not offer Libor mortgages. 

 

Advantages with a bank

  • Broad product range including short- and long-term fixed-rate and Libor mortgages
  • Special financing such as building loans, holiday properties, enhanced affordability and mortgage advances may be possible

 

Advantages with an insurance company

  • Favourable mortgage interest rates for long-term fixed-rate mortgages
  • With a good credit rating, a term of more than 15 years is possible
  • Amortisation may also be possible with fixed mortgages (Generali: up to CHF 20,000 per year)
  • No forward surcharge (Generali: fixing the interest rate up to 1 year in advance is free of charge)

 

Take enough time to find the mortgage model and provider that is right for you. The mortgage experts at Generali will be happy to help you.

 

 

Ask for a quote

 

The author

 

Christian Breutel, Director Real Estate & Mortgages, Fortuna Investment


Fortuna Investment AG ist eine Tochtergesellschaft der Generali (Schweiz) Holding AG

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