Is that true ? I thought I read somewhere that that penalty payment isn't actually enforceable in Swiss law ?
I know I can 'transfer' the mortgage if I want to buy another property but, maybe, I have reasons to change lender
I am 1 year into a 3 year fixed rate, interest-only swiss mortgage on my swiss flat. If I sell the flat tomorrow and give back what was borrowed, I assume that is 'terminating' the fixed-rate mortgage. So that means I have to pay the 2 years of interest payments that I would have paid anyway ? (or is 'terminating' just taking a different mortgage product for the same property ?)
there's a really good thread on this on EF if you search on it, there is a chap who went to the ombudsman about it. the termination charge im pretty certain is enforcable, otherwise fixed term mortgages woudl have no point, but the key is what is the penalty charge - is it based on 0% vs what you have or is it the current interbank (which is currently below zero). from what was on the other thread they were trying to charge the diff between the current interbank and the rate, i.e. actually greater than he normally pays per month, however the ombudsman ruled in his favour and it was the rate vs 0%, however its not cast iron, it was highly subjective i recall.
That's really interesting.. but it's answering a different question..(how is a terminated contract 'penalty amount' calculated?) I'm asking, just as a sanity check, is the sale of a property financed under a fixed term mortgage, where the mortgage isn't transferred, grounds for terminating the fixed term mortgage such that a penalty can be enforced by law ?
Legally i can’t be sure but common sense would say absolutely yes because with no house you haven’t got a mortgage you’ve just got a bloody great loan and the banks backup if you don’t pay which is to repossess and sell your house, no longer exists.
Yep.. just checking.. in case the 'penalty' is only there if you want to swap to a more advantageous offer.
I'll obviously talk to the lender but it's always good to get other, impartial, feedback.
My own feeling (and just a feeling) is you could always talk to your bank if you wanted to change a deal to another deal (fixed >> variable for example) like you would with any term change, they might agree. As soon as you step outside and you want to go to another lender, I think they'd pull it in and ask for the remainder and be entitles to do so.
but Im interested like you in any other feedback, im 7 years through a ten year and with rates possibly turning their tails upwards in the coming years it may well be the case that a break in the near term, with penalty, would still end up worth it in the long run, so hopefully some other people will tune in.
Boring answer but most of the information you seek is normally given in your mortgage contract. Your mortgage lender will be able to fill in any gaps. Rule of thumb is that the penalty normally equates to lost income, there may also be a penalty payment on top.
Everything is negotiable though so worth picking up the phone and calling your lender if you're unsure.
Where are you going? You can take your mortgage with you to the next property in Switzerland. Alternatively, if you have a very competitive rate, you can hand over the mortgage to your buyer - they will only want it if it is better than they can currently get.
I was advised by the ZKB that I would have to pay the outstanding interest payments if I cancelled the mortgage early. But I never put it to the test...
A fixed rate mortgage is exactly that.
Principal X interest rate X full period.
You can pay back what ever you like when you like, but the interest is still due.
Banks take your mortgage agreement and buy the corresponding amount in the money markets with exactly same terms, amount, interest rate and time.
They make their cut on the difference of interest rates between money market and what is written on your piece of paper.
Short answer? Yes you pay back the interest on the remaining 2 yrs if you terminate after 12 months.
How do I know? Because we wanted to sell our house after 6 yrs into a 10 yr fixed term.
In the end we got round it by the weirdest Swiss trickery by keeping the mortgage and on the day of sale putting the principal sum into a deposit account at the lending bank then continuing to pay interest on it until such time as we needed to draw down in tranches on the principal sum against our builder’s certificates of various stages of partial completion of our new build. In the end this worked massively in our favour as otherwise we would have had to get out a building mortgage at a much higher rate but this was merely through luck of our circumstances than judgement.
Many people have no idea that if they wish to terminate their fixed term because - say - a job offer comes up unexpectedly elsewhere or - in our case - a child is born with disabilities meaning we decide to move elsewhere where we feel we can better negotiate the system on his behalf - that you are nevertheless locked in to the fixed term.
Life is unpredictable. Fixed terms - by their very nature - are (sadly but inevitably) not.