A mortgage is a loan specifically used to purchase real estate, where the property itself serves as collateral. This means if you fail to repay the loan, the lender can take possession of the property.

In Switzerland, the most common types of mortgages are:

• Fixed-Rate Mortgage: The interest rate remains constant for the entire term of the loan, providing predictable payments.
• Variable-Rate Mortgage: The interest rate can fluctuate based on market conditions, which can lead to changes in your monthly payments.
• Adjustable-Rate Mortgage: The interest rate is periodically adjusted according to a specific benchmark or index, affecting your payments.
• SARON-based mortgages are tied to the Swiss Average Rate Overnight. SARON mortgages have become more common as LIBOR is phased out.
• Syndicated Mortgage: A loan provided by a group of lenders, often used for larger loan amounts or complex financing needs.

Choosing the right mortgage depends on various factors, including:

• Your financial stability and ability to handle fluctuating payments
• Your preference for predictable payments versus potentially lower rates
• The length of time you plan to stay in your home
• Current interest rates and economic conditions Consulting with a mortgage advisor can help you make an informed decision based on your personal circumstances.

Several factors can influence your mortgage rate:

• Credit Score: Higher credit scores generally lead to lower interest rates.
• Loan Amount: Larger loan amounts might have different rates compared to smaller ones.
• Down Payment: A larger down payment can reduce your loan-to-value ratio and potentially secure a better rate.
• Loan Term: Shorter loan terms typically have lower rates but higher monthly payments.
• Economic Conditions: Market interest rates and economic factors can affect the rates offered.

The loan-to-value (LTV) ratio is a measure of how much you are borrowing compared to the value of the property. It is calculated by dividing the mortgage amount by the property value and is expressed as a percentage. For example, if you’re borrowing CHF 400,000 on a property worth CHF 500,000, your LTV ratio is 80%.

Mortgage points are fees paid upfront to reduce the interest rate on your loan. One point typically equals 1% of the mortgage amount. Paying points can lower your monthly payments and total interest over the life of the loan, but it requires a larger upfront payment. Consider points if you plan to stay in your home long-term and want to lower your overall interest costs.

• Pre-Qualification: A preliminary step where you provide basic financial information to estimate how much you can borrow. It is not a guarantee of a loan.
• Pre-Approval: A more in-depth process where the lender reviews your financial details, credit history, and income to provide a conditional commitment for a specific loan amount. Pre-approval is stronger and often required by sellers.

Closing costs are fees associated with finalizing a mortgage and purchasing a property. They typically include:

• Appraisal fees
• Title insurance
• Legal fees
• Notary fees
• Administrative fees
• Registration fees Closing costs can vary, so it’s important to budget for these expenses when planning your home purchase.

Yes, you can pay off your mortgage early, but it may come with prepayment penalties depending on your mortgage agreement. Some lenders allow early repayment without penalties, while others may charge fees if you pay off the loan before the end of the term.

Missing a mortgage payment can lead to late fees and negatively impact your credit score. If you continue to miss payments, your lender may start foreclosure proceedings, which could result in losing your home. If you’re struggling with payments, contact your lender as soon as possible to discuss possible solutions, such as a payment plan or mortgage modification.

Refinancing is the process of replacing your existing mortgage with a new one, often with different terms. People refinance to take advantage of lower interest rates, reduce monthly payments, change the loan term, or access home equity. Consider refinancing if it aligns with your financial goals.

To improve your chances of mortgage approval:

• Maintain a good credit score
• Save for a larger down payment
• Reduce existing debt
• Provide accurate and complete financial information
• Ensure stable employment and income

• Not Checking Your Credit Report: Ensure your credit report is accurate and address any issues before applying.
• Overextending Your Budget: Borrow only what you can comfortably repay based on your financial situation.
• Ignoring Additional Costs: Consider closing costs, maintenance, and property taxes when budgeting.
• Not Shopping Around: Compare mortgage rates and terms from different lenders to find the best deal.

For personalized mortgage advice,  you can apply for a Free Consultation here.