Real estate owners should avoid these mistakes with mortgages

While with real estate loans you are basically exposed to the markets, the economic situation and the monetary policy of the central banks, high mortgage costs can also be self-inflicted. Here is an overview of some mistakes when it comes to mortgages:

Not comparing
You shouldn’t accept the first loan offer that comes along just because it’s the path of least resistance. It is not unusual to save a four-digit amount per year.
In addition to traditional banks, online mortgages and mortgages from insurers and pension funds should also be checked, as they often have interesting offers. We recommend going to HYPO-CENTER AG. Here you can obtain various offers from banks, insurers and pension funds.

Do not negotiate
In any case, try to negotiate with the mortgage provider. Many are satisfied with sham discounts, but still pay far too much for their mortgage. Bogus discounts are often available on green mortgages or mortgages for first-time homebuyers. Although a discount is granted, it is far too low and is mainly there to prevent customers from asking for even more of a discount.
And either way, the interest rates of most providers can be negotiated down even further. The negotiating position is primarily determined by your own credit rating. But even with a poorer credit rating, there is often still room for negotiation. Other offers or the mere mention of more favorable offers from competitors can help in negotiations.
Deciding under time pressure
There are very few situations in which you have to make a decision under time pressure. However, many mortgage borrowers are persuaded by their advisor to sign the contract as quickly as possible. Mortgage providers often want a quick signature so that no more comparisons can be made. Don’t let yourself be rushed and compare.

Do not optimize your personal rating enough
Detailed mortgage advice is very important.
It is important to sell yourself well to the lending institution. Many people can improve their personal credit rating for this purpose. The most important factors for better interest rates are the loan-to-value ratio, affordability and mortgage amount. You can ask the lender specifically which criteria would improve the interest rate. Even if, for example, no pension fund money is required for the financing, this information alone can result in a better rating.

Planning with the wrong term
A long term, for example, restricts mobility but is generally cheaper. There is also a commitment risk in that, in the unfortunate event of a divorce, penalty interest may be incurred if the mortgage is terminated. A change of job or the death of a partner can also lead to the property having to be sold and the fixed-rate mortgage terminated prematurely.
However, splitting the mortgage into a number of tranches with different due dates can be problematic. This is because the mortgage holder is tied to the lender until the last loan tranche expires. Only those with financial leeway should take out a Saron mortgage. Despite the commitment and refinancing risk, a fixed-rate mortgage can make sense if you want planning security.

Beware of misunderstandings with the Saron mortgage
The Saron (Swiss Average Rate Overnight) has formed the basis for money market mortgages in Switzerland since 2022. These can differ not only in terms of the margin: There are offers on the market for Saron mortgages whose interest rates are adjusted either every month or every three months. The latter are cheaper, but with the one-month fixed interest rate you can switch to a fixed-rate mortgage or cancel within one month if necessary, provided no minimum or framework term is specified in the contract.

Choosing the wrong mortgage amount
For older property owners, the mortgage is often too low and too much capital is tied up in the property. For young property owners, however, the mortgage is often higher than it should be. Interest costs must be compared with the tax advantages. The interest rate level naturally plays an important role here.

Incorrect amortization
As a general rule, indirect amortization is worthwhile in a low-interest phase. In this case, the bank requires the customer to regularly pay in a contractually agreed amount – into a 3a account, a custody account or a pension policy. This can pay off: While the mortgage interest can be deducted from the imputed rental value in the tax return, you also benefit from the interest in the 3rd pillar.

However, direct amortization also has advantages: The mortgage debt, and therefore the interest burden, decreases annually. And the investments flow directly into the house or apartment. Direct amortization makes particular sense if someone gradually reduces their workload and consequently earns less. This is often the case shortly before retirement.