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If you want to finance a property, you usually need a mortgage loan. Such a loan is granted by a bank, insurance company or pension fund which in return receives a lien on the property which is registered in the land register. Depending on the size of the loan and the general interest rate development, the mortgage is granted either with a fixed or variable interest rate. However, the loan-to-avlue ratio is limited, and the affordability must also be assured. This requires a precisely coordinated financing strategy. MoneyPark provides comprehensive advice and will find the best interest rates so you can be confident of securing a mortgage loan that meets your needs.
What are the requirements for a mortgage loan?
Before a mortgage loan can be granted, two basic requirements must be clarified: the loan-to-value ration and the affordability.
The loan-to-value ratio is generally calculated by the ratio of the mortgage to the sale value of the property. The sales value is determined by the financial institution on the basis of various criteria. The size and position of the object are decisive, but also the average prices in the neighbourhood. In addition, the loan-to-value ratio can not cover the entire market value, but is usually set at an upper limit of 80 percent of the market value. This means that mortgage holders must contribute at least 20 percent equity before a mortgage loan can be included in the remaining sum. With an additional advance withdrawal of assets from the pension fund or a corresponding bond, the share of the owner's funds can be increased.
The affordability again reflects whether the mortgage holder is financially able to cope with the monthly burdens of mortgage loans and maintenance costs and is a maximum of 35 percent of the gross income. Interest rates, amortization and maintenance costs for the object are taken into account. The interest rate is calculated with the so-called implicit interest rate is assumed, which is 5 percent, higher than the market interest rates. This means that the affordability takes into account rising interest rates. The amortization can be done in two ways: directly, effectively reducing the mortgage rate, or indirectly by setting up pledged assets in the pillar 3a or through a life insurance policy. Different arrangements for amortization apply in the case of a second mortgage.
Find the right model for your mortgage
Once the loan-to-value ratio and affordability have been determined, the exact conditions for the mortgage loan can be fixed. On the one hand, this involves the amount of the mortgage, which means the sum of the debt capital that you need to finance your property. On the other hand, you must be aware of your initial situation and risk-taking in order to find the appropriate mortgage model. There are basically three ways how a mortgage can be designed and each model has its specific advantages and disadvantages. In addition, many credit institutions now rely on mixed forms and add additional features. In principle, however, all mortgage loans are based on one of the following models:
- Fixed-rate mortgage: The interest rate is stable for the entire term, usually lasting from between 5 and 10 years, the longer the mortgage the higher the interest rate.
- Variable-rate mortgage: The interest rate is adjusted in the short term to the interest rate trend, the term is not limited and there is a notice period of 3 or 6 months.
- LIBOR mortgage: The interest rate follows the Euro money market rate (LIBOR) and is adjusted regularly (every 3, 6, 9 or 12 months). The term is limited to 2 to 5 years and additional interest cover is possible.
MoneyPark finds the best terms for your mortgage loan
Working out which model is best in which situation is very difficult as is trying to compare the terms of various offers from banks and insurance companies. MoneyPark offers competent, comprehensive and independent advice with regard to the appropriate financing strategy and will provide you with the best possible conditions for a mortgage loan. We work in close cooperation with more than eighty financing partners in Switzerland.
Make an appointment with your personal MoneyPark advisor today.
Current mortgage rates
The displayed interest rates are the best rates currently available. Your personal interest rates may vary depending on LTV, affordability, mortgage amount and the location of the property.