Any knowledge welcome.
For a 1 MM mortgage, pros/cons of each offering?
There is no right answer, this depends on your financial situation
I have an 8-year fixed as a compromise because if you want to cash in your chips before 10 years the bank will want you to pay to the end...
How likely are you to want to move out within the term (painful unless you're trading up) against how much are base rates gonna go up.
If you split your mortgage in to different periods, (ie 50% at 5 years, 50% at 10 years) you can never change banks without paying off the full mortgage before moving as banks here will not split the mortgage on a property, to expensive and time consuming.
Don't ask me why banks always push this option as a wonderful way for you, the client, to avoid any big upswings/down swings in the mortgage rate......
The only entity to profit from this is the bank as they tie you in.
The only ewxception would be 50% fixed, 50% Saron 3 months.
Any views/experience on whether to select fixed vs. Saron or a mix of both if one does not want to sell but keep the property (New construction) for the long-term with plans to stay at the same bank (Kantonalbank)?
Many thanks.
I dont know your full situation. Ours is the following. My wife and I both work full time. We also know interest rates at 2.5% plus or minus is wonderful . Even in the US the interest rates are 4% plus or minus. In India is 8%. Seems to me it is sort of proportional to the inflation....which at the moment is going up, everywhere.
So will it ever be better than 2.5% with a looming financial crisis and a war...? Probably not. So there isnt much upside to 2.5% it wont get better.
Will it get worse...? Probably yes.
In general it is better to fix it at 2.5% when you have a chance than to fix it at 4.5% or 8.5%, at at this point most likely you are totally screwed.
I spoke to a frield who works at UBS and regrets not fixing it a year ago when he could. Now he is in a squeeze. Floating rate is too good to give up and fixed rate is too high to sign up. The spread is increasing and he feels insecure with floating and cant afford to fix it. For him, it can only get worse from there. He has to catch a falling knife that is heading for his neck.
For us : At 4.5% and 8.5% we wont be able to afford any property unless our income catches up, which is highly unlikely. Or we move into the woods.
So effectively, we are buying a mortgage and have a property to show something for it, and fixing it for next 10 years so if we want to upgrade, we have a fixed mortgage to fall back on.
Essentially, money is cheap, borrow as much as you can afford to, FIX it and enjoy the benefits of a leverages investment. Worst case, you have a house to live in. Best case, that plus, your investment will grow and when you sell, you have something to show for it.
I have been saying this to all my friends in the last 4 years. I continue to say that same. :-) Best wishes
Historically it was cheaper to use short term financing though, LIBOR once it became available as base for mortgages. Of course inflation was generally falling or flat, yet it still applies even now (for the time being).
Affordability isn't really a problem at this point. It looks more like he's suffering from a version of buyer's remorse.
I guess the real question is, what lets you sleep tightest, are you content with good enough or do you chase the optimum? He may be one of those who would be well advised to split the mortgage, going against Biro's spot on post, because by splitting he can see himself as a winner regardless of what happens.
I've got 50/50 7Y/SARON.
I do have still have cash, so I could "shorten" the SARON mortgage into a lower, fixed one . And I didn't go to my financial "limit".
A seven figure mortgage is really something else.
It's unlikely we will see SARON rates over the current fixed rates in the near future - mortgages would be the least of our problems then.
At least, I believe the SNB cannot completely disconnect their interest-rate regime from the ECB and the FED (and everything points to the FED ending their QT sometime in 2023...).
How does it work as per your example?
1M property
200k deposit
800k mortgage
So you are getting 400k on SARON and 400k on 7Y fix?
Bank requires to repay 15% of mortgage within 15 years. From which part is is being deducted? From SARON one?