The most favorable terms for your mortgage

Find the optimal mortgage for your dream property with MoneyPark

With MoneyPark you will find the optimal financing solution tailored to your needs. But to get the best possible terms, you have to consider some basic conditions - and make some important decisions. MoneyPark is at your side every step of the way: as an independent and competent companion for the financing of your property. By the way: Our mortgage comparison offers you an overview of the best conditions of different providers.

What is a mortgage?

Whether it's a condominium or your own house - if you want to acquire a property with a suitable plot of land, you usually need financing. The most common form is a mortgage loan. The property itself and certain assets that can be pledged serve as collateral. Only with this collateral, the mortgage provider - a bank, an insurance company or a pension fund - grants the mortgage.

The conditions such as interest rate, term and amortization are fixed from the outset and become legally valid when the mortgage is concluded. But only after the last installment the property and the land become the property of the mortgagee. If he cannot make the repayment, the mortgage provider may sell the property. By selling the property, he can try to cover the outstanding mortgage amount and his costs.

Two basic requirements for any financing

In order to be able to repay the mortgage loan, all financial institutions set minimum requirements for mortgage holders based on legal requirements and voluntary commitments. This is not only in the interest of the banks and insurance companies, but also serves the customer. With the help of a solid and long-term oriented financial planning you protect yourself against a later loss of the property.

The two basic requirements are:

• - Loan-to-value ratio
• - Affordability

Loan-to-value ratio

80 percent - This is the maximum loan-to-value ratio for a mortgage in Switzerland. The term refers to the ratio of the mortgage amount to the market value of the property. Conversely, this means that you must contribute at least 20 percent from your own capital. Banks and other financial institutions generally only grant the highest possible loan-to-value ratio if additional collateral - for example, inheritance benefits or retirement capital from pillar 3a - is pledged.

In such cases, it is also usual that the required amount is split into 2 mortgages. The first mortgage is granted up to a loan-to-value ratio of about 67 percent of the market value, the second mortgage covers the remaining 13 percent. However, there are separate conditions for the second mortgage, which concern the interest rate, term and the exact form of the loan/credit.

Want to know your loan-to-value ratio? Click here for the calculator.

Affordability

About 35 percent - By more than this percentage your monthly income should not be burdened by the expenses for the property. Considered are on the one hand interest and amortization payments of the mortgage, on the other hand also running costs for maintenance and provisions for larger modernization measures, which are perhaps due in 10 or 15 years. The basis for the calculation is your gross income, i.e. your income before taxes.

However, the calculation is not based on the actual interest rate, but on a calculatory interest rate. This is several percentage points higher than the mortgage interest rates charged on the market. This is because it is intended to take into account any interest rate increases that may occur in the medium and long term. After all, property financing should still be on a firm footing in 5 to 7 years' time.

Want to know your affordability? Click here for the calculator.

Variable-rate, fixed-rate, Libor or Saron: the four types of mortgages

When taking out a mortgage, there are usually four different types available: There is one fixed-rate model and three variable-rate mortgage forms. Under certain circumstances, additional models or even mixtures of different models are possible. Which form is the optimal one depends on the financial starting position: The decisive factor is, for example, how much leeway there is for higher monthly installments in the short term. Every form has its advantages and disadvantages.

The most important mortgage models are

• - Fixed-rate mortgage
• - Variable-rate mortgage
• - Libor mortgage
• - Saron mortgage

Fixed-rate mortgage: With this mortgage model, the interest rate is stable over the entire term. Maturities between 5 and 10 years are usually chosen. This allows mortgage holders to secure the currently low interest rates and benefit from a low risk premium. This is because the longer the agreed term, the higher the premium with which mortgage lenders protect themselves against the default of a mortgage.

Variable-rate mortgage: This form is characterized by an indefinite term and an interest rate that the financial institution adjusts at regular intervals. If the general interest rate level falls, the monthly rate is also lower. If interest rates rise, you have to pay more accordingly. If you regularly receive larger bonuses or dividends, this model makes it relatively easy to make unscheduled amortization.

Libor mortgage: In principle, this model is similar to the variable mortgage, but the loan has a fixed term of between 2 and 5 years. The interest rate is based on the LIBOR - the money market interest rate for major banks in London. The adjustment is made automatically and at pre-determined intervals - every 3, 6, 9 or 12 months. In addition, the respective financial institution charges a margin which is added to the LIBOR rate. The LIBOR mortgage is currently a favourable form of financing, but it does involve interest rate risks.

Saron mortgage: The Saron is about to replace the Libor in Switzerland. Unlike the Libor, the interest rate of the Saron is based on actual transactions and is therefore more transparent. In the past, Libor and Saron interest rates were usually very similar.

Competent mortgage advice by MoneyPark

If you have a competent companion on the way to your dream property, you will reach your goal faster, easier and cheaper. MoneyPark advises you comprehensively on all questions concerning property financing and analyzes exactly your financing needs and your financial situation. Based on this, we search for the best possible offer for you. The basis of our success is our network of more than 100 Swiss mortgage lenders throughout Switzerland, which enables us to compare countless products.