SARON or fixed-rate mortgage?
The right choice
Choosing between and is one of the most important decisions when financing a property.
Both differ fundamentally—and have clear advantages and disadvantages.
The right choice depends mainly on your risk tolerance, your financial situation, current interest rates, and your assessment of future interest rate trends.
A fixed-rate mortgage is a mortgage with a fixed interest rate over an agreed term. This means that mortgage interest rates remain unchanged throughout the entire term, providing planning security regarding financing costs. Fixed-rate mortgages are among the most popular types of mortgages in Switzerland. Learn more here: Fixed-rate mortgages in Switzerland
A mortgage loan model describes the type of interest rate structure and term of a mortgage, such as Fixed-rate mortgage,SARON mortgage, or variable-rate mortgage. Transparent models make it easier to compare options and help you consciously manage interest rate risk and ensure planning certainty. Find more information here about mortgages with long terms: 10-year fixed-rate mortgage
In a nutshell
SARON or Fixed-rate mortgage?
The SARON mortgage is flexible and usually more affordable, but is subject to fluctuating interest rates.
A fixed-rate mortgage offers a fixed interest rate and maximum planning security, but is less flexible as a result.
The key question
Security or flexibility?
The choice often comes down to one key question: If you want maximum security, a fixed-rate mortgage is the right choice—but if you want maximum flexibility and the chance for lower overall costs, the SARON mortgage is the better option.
Pros and cons
What you need to know
Advantages of a fixed-rate mortgage
Disadvantages of a fixed-rate mortgage
Benefits of the SARON Mortgage
Disadvantages of the SARON Mortgage
Common mistake
“I’ll start with SARON and switch later”
This strategy sounds logical—but it’s often problematic.
This is because interest rates often rise quickly, the optimal time to switch is hard to predict, and you are often bound by framework agreements—making it nearly impossible to switch providers and thus experience genuine interest rate competition.
The episode
Changing mortgage loan models often results in unfavorable terms.
Video on the topic
Could your mortgage interest rates double in a short period of time? In this video, Florian Schubiger uses historical data from the past 50 years to show you just how much SARON mortgages can actually fluctuate—and why many people underestimate this risk.
@Mortgage
Florian Schubiger
Founder of Mortgage.ch
SARON Alternative
Fixed-rate mortgage with an exit option
Less well-known but particularly interesting: There are providers that allow you to exit a 10-year fixed-rate mortgage for free or at a very low cost. Such are particularly common among and
This combination of security and flexibility is a major advantage. You’ll find exactly these kinds of offers on HYPOTHEKE.ch.
A Mortgage without a repayment penalty can be terminated or repaid before the end of the term—even in the case of fixed-rate mortgages—without incurring additional costs (or only very minimal ones). Such Mortgages offer greater flexibility. They are often offered by Pension funds or investment foundations and are not necessarily more expensive than mortgages without an early termination option. On HYPOTHEKE.ch, there are usually two to five providers online that allow early termination. In most cases, terminating the Mortgage free of charge is subject to certain conditions, such as the sale of the property.
A mortgage from an investment foundation is a real estate financing product provided by an investment foundation. Investment foundations invest pension fund assets in mortgages, among other things, and often offer attractive mortgage rates as well as long-term financing solutions. Because they typically do not have their own sales teams, mortgages from investment foundations can often only be arranged through mortgage platforms. HYPOTHEKE.ch collaborates with several investment foundations and even applies for sales exclusively for some of them.
Break free from the ties
Fixed-rate mortgage with no repayment penalty—the best of both worlds.
In the Mix
Combination of the two models
Some homeowners opt for a combination. This strategy can make sense, but it also has many drawbacks.
The problem: Flexibility is limited, switching providers is often not possible, and when it comes to Extension, the is correspondingly weaker. In addition, a margin increase is possible for the SARON Mortgage during the Term.
A clear strategy is better, or—if possible—spreading the debt across multiple properties. Having a staggered Mortgage comes with many disadvantages.
Read more here: Should you opt for a stepped-rate Mortgage or not?
If you want good interest rates in Switzerland, you should negotiate mortgage rates. Those who compare offers from multiple providers and properly optimize their Mortgage credit score have a better chance of securing a lower interest rate and often save a lot of money over the Term of the loan. On mortgage platforms such as HYPOTHEKE.ch, interest rates have already been optimally negotiated, which is why they’re usually better than those offered through bank branches. Learn more here: How to Negotiate a Mortgage Effectively
Hurdle race
Stepped-rate mortgages can easily turn into a risky obstacle course.
Amortization
Note the differences
With a fixed-rate mortgage, is usually only possible by contractual agreement.Amortization is often more flexible with a SARON Mortgage—depending on the contract, but no later than the end of the
For both Mortgage loan models, you can choose to or .
Learn more here: Direct or indirect amortization
Mortgage Amortization
Amortization refers to the repayment of the mortgage debt. It can be made directly to the mortgage lender or indirectly through pledged assets such as a Pillar 3a account, and it affects interest costs, taxes, and financial flexibility. Find more information here: Direct versus indirect Amortization,optimal mortgage amount,first and second mortgages explained,Amortizing a Mortgage upon retirement
With direct amortization, the mortgage balance is continuously reduced through regular payments. As a result, both the mortgage balance and interest costs decrease gradually over the years. Learn more here: Direct Amortization vs. Indirect Amortization
With indirect amortization, the Mortgage debt is not repaid directly; instead, the money is paid into a tied pension plan, such as a Pillar 3a account. The Mortgage thus remains in place, while at the same time pension capital is built up and tax optimization is often possible. Learn more here: Indirect Mortgage Amortization
Direct-Indirect
Sometimes direct amortization is the simpler solution. But it’s not always the better one.
Choosing the right Mortgage loan model is crucial when taking out a mortgage. We help you make this important decision—completely impartially and independently.
Daniel Bosch
Mortgage expert
Conclusion
SARON or fixed-rate mortgage?
A fixed-rate mortgage is ideal for risk-averse individuals and is particularly suitable when interest rates are rising. The SARON mortgage is ideal for anyone who values flexibility and is often the more affordable solution in the long term.
The best solution is always the one that best suits your personal situation and needs.
Frequently Asked Questions
Answers to help with this difficult decision
A fixed-rate mortgage has a fixed interest rate over a specific Term.
A SARON mortgage has variable interest rates that are continuously adjusted based on the money market.
Learn more about different mortgage terms here
Fixed-rate mortgages | 5-year fixed-rate mortgage | 10-year fixed-rate mortgage | Saron mortgage
A fixed-rate mortgage is particularly worthwhile when interest rates are rising, when planning security is important, or when risk tolerance is low.
A SARON mortgage is suitable for individuals with financial reserves and a willingness to take risks who expect interest rates to remain stable or decline.
A combination is possible, but often has disadvantages:
• Less flexibility
• More difficult to switch providers
• Limited negotiation options
Staggering mortgage payments can also have disadvantages. Read more here: Staggering mortgage payments
Learn more here: Mortgage tiering
Interest rates typically rise relatively quickly, causing financing costs to increase significantly in a short period of time. The SARON interest rate tracks the SNB’s key interest rate on a one-to-one basis.
The right choice depends on your risk tolerance, your financial situation, and your assessment of interest rate trends. Comparing different providers is crucial to finding the best solution.
Use HYPOTHEKE.ch for this.
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