Is your mortgage - or at least a tranche of it - due soon? Waiting to see what your bank offers you and having a cup of tea is not a promising strategy. You should think about whether you want to extend or redeem your mortgage 12 to 18 months before it is due. The decision has far-reaching financial consequences for you: The "right" mortgage will save you a few thousand francs a year, while the "wrong" mortgage will cost you a few thousand francs a year - without any added value or additional benefit. Therefore, talk to your bank one to one and a half years before extending or replacing your mortgage, check alternatives and compare offers.
Many loan agreements stipulate a cancellation period of 3 to 6 months. So don't wait too long with the subsequent financing: on the one hand, time pressure is a bad counsellor in price negotiations, on the other hand, you may be giving away a lot of money if you miss the deadline.
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Many homeowners extend their mortgage without looking at alternatives or comparing interest rates. Most of them do this because it's convenient and easy. All it takes is a phone call. Alternatively, because they are used to having everything from their private account to their securities account to their mortgage with the same bank. All they have to do is renegotiate the conditions and that's it.
With many banks, you can extend your mortgage early if you are convinced that interest rates will rise and you want to secure the current interest rate. With UBS key4 mortgages, for example, you can extend your fixed-rate mortgage up to 18 months before the due date.
More and more homeowners are prepared to change their bank if another bank offers more attractive follow-up financing. If you want to redeem your mortgage, you have to cancel the loan agreement 3 to 6 months before it expires, depending on the terms of the contract. This is time-consuming, but can definitely be worthwhile. For example, if you can take out a ten-year fixed-rate mortgage for CHF 500,000 at 1.80 per cent instead of 2 per cent, you save CHF 1,000 per year or CHF 10,000 over 10 years.
The early repayment fee is charged by the bank to compensate for potential losses when mortgage borrowers end their loan agreement ahead of schedule. The fee is determined based on the mortgage amount, the gap between the original mortgage interest rate and the current reinvestment interest rate, and the remaining time until the loan's maturity.
Many banks are accommodating if there are less than 12 months between the due dates of the first and second tranches and you agree to transfer both tranches from the previous bank to the new bank. It becomes more difficult when the due dates are more than 12 months apart. The new bank is often not prepared to take over the first instalment only. With a mortgage note splitting, you can synchronise the maturity of the first tranche with the maturity of the second tranche and switch to the new bank with the entire mortgage as soon as both tranches fall due. Talk to your bank and work together to find a solution that suits you and the bank.
The expiry of a mortgage is a good opportunity to rethink your home financing and mortgage strategy. A homeowner who financed their home 10 years ago with a 5-year and a 10-year fixed-rate mortgage certainly had plausible reasons at the time. Perhaps they believed that mortgage interest rates would not fall any further, perhaps they wanted to budget down to the exact franc and centime and sleep more soundly. It is quite possible that their life circumstances and/or market assessment have changed in the meantime and that splitting into a fixed-rate mortgage and a SARON mortgage would make more sense today. You should therefore take advantage of the extension or redemption and talk to your bank about follow-up financing. Play with open cards and tell your advisor that you are looking around the market and obtaining offers from competitors. This will demonstrate that you will not be satisfied with the first offer you receive.
If you are planning to renovate your house or flat in the foreseeable future or carry out (energy-related) refurbishment, the extension or redemption is the ideal time to increase your mortgage. The same loan-to-value and affordability rules apply to an increase as to a new mortgage
Let's assume you have opted for a balanced mortgage strategy: 40 % in a SARON mortgage and 60 % in a fixed-rate mortgage with a 12-year term. By staggering the terms, you avoid having to refinance the entire amount at the due date in a potentially unfavourable interest rate situation. With the various mortgage models, you spread the interest rate risk over different base rates. Obtain quotes for this strategy, not for variants, so that you can compare apples with apples. Pay attention not only to the price, i.e. the interest rate, but also to the conditions and the small print in the loan agreement. The devil often hides in the detail. For example, how the early repayment penalty is handled.
Many banks publish so-called display interest rates on the Internet. These non-binding indicative interest rates are negotiable. They are often significantly higher when compared to the best offers on the market. Homeowners with a first-class credit rating who negotiate skilfully can save a lot of money.
If you are reluctant to take the time to redeem your mortgage, extending it is the simpler and more convenient solution. However, you limit your chances of negotiating a better mortgage rate and reducing your housing costs. With a redemption, you let the market play out and improve your chances of negotiating better conditions. To do this, you will need to resubmit all documents and go through a complete credit check process.
