When financing real estate, the mortgage usually needs to be renewed after a few years. Whether it is a single tranche or the entire mortgage, it must be converted into a new product, fixed-rate mortgage or Saron mortgage. This often also offers an opportunity to redeem the mortgage, i.e. to change mortgage providers. In this article, we explain what you need to bear in mind and provide specific tips and tricks for successfully extending your mortgage.
Whether you have a fixed-rate mortgage or a Saron mortgage, a new mortgage product can be taken out at the end of the predefined term.
If, for example, you took out a fixed-rate mortgage several years ago, you now have the option of extending or restructuring your mortgage at the end of the contractually agreed term. You can now choose from the entire product range, with fixed-rate mortgages and Saron mortgages forming the core elements.
If you stay with your current mortgage lender, the mortgage will simply be extended.
However, if you switch mortgage providers when extending your mortgage, this is referred to as a redemption. This is only possible with the entire mortgage amount. All your mortgage tranches should therefore mature more or less at the same time, with no more than two years between them.
When the mortgage term expires, you have the option of restructuring the mortgage and adjusting the amount of the mortgage debt, just as you would when taking out a mortgage. You may want to take advantage of this opportunity to make an extraordinary amortisation payment. Always take tax aspects into account when making your decision. In this context, it may also make sense to review your pension situation. Whether it’s taxes or pensions, an independent mortgage specialist such as MY HYPOTHECA can assist you.
MY HYPOTHECA is an independent mortgage broker based in Zurich. The public limited company was founded in 2021 and now has 10 employeesand operates sites in Zurich, Bern and Basel. MY HYPOTHECA stands for fast and convenient processing of mortgage loans. The aim is to save customersvaluabletime and relieve you of all your concernsregarding real estate financing. Since commencing business operations, we have assisted several thousand customers on their journey to home ownership.
In the opposite case, extending the mortgage always offers the possibility of an increase. Perhaps you have specific conversion or renovation projects planned, such as a new roof or replacement heating system. Depending on the loan-to-value ratio of the property and your affordability, these projects can be financed, at least in part, by increasing the mortgage. It does not matter whether you simply extend your mortgage or even replace it, i.e. change providers.
Your bank will usually contact you a few months to a few weeks before your mortgage expires to discuss renewal. However, to be fully prepared for the renewal of your mortgage, you should start looking into it 6-18 months before it expires. This will give you enough time to seek independent advice and find the best option for you.
As mentioned above, your bank will contact you when your mortgage matures and will often immediately submit a specific proposal for renewal, including the mortgage interest rate. At first glance, this may seem convenient and easy for you. And it is a good solution – for the bank, but certainly not for you. Avoid accepting the first proposal you receive at all costs. Instead, seek independent and comprehensive advice. You should have at least three different offers to choose from in order to find the best solution for you. Searching for the best offers on the market can be time-consuming, challenging and even a little tedious. Independent mortgage brokers take this work off your hands.
It is always worthwhile to approach the renewal of your mortgage early and in advance. Banks usually charge an additional fee for early renewal if the maturity date is several months in the future. With skilful negotiation or the right mortgage advisor, this additional fee can often be avoided.
However, early renewal primarily depends on your expectations regarding mortgage interest rate developments. If you believe that interest rates will rise before the actual maturity date, early renewal is worthwhile in most cases.
If the bank charges a term surcharge for early renewal, please note that this term surcharge applies to the entire mortgage amount and the entire term.
If you keep your mortgage with your current provider, there are a number of advantages and disadvantages:
If you switch providers, there are also some advantages and disadvantages that you should consider:
When you extend or refinance your mortgage, it is always a good opportunity to review your mortgage strategy. This means deciding which mortgage model and term to choose, how high the mortgage should be and what your pension situation looks like.
If you plan to sell the property in a few years, you should opt for a short-term fixed-rate mortgage or a Saron mortgage..
If you expect interest rates to rise (sharply) and want to hold the property for the long term, a fixed-rate mortgage with a term of 5 to 10 years is the right choice.
If you need clearly calculable mortgage interest rates, there is no way around a fixed-rate mortgage.
An independent mortgage advisor will work with you to evaluate your financial situation and define your needs. This provides a solid basis for starting the search for the right mortgage. Your mortgage advisor will present you with a pre-selected range of offers from the wide variety available, which have already been renegotiated with the providers in your interest. Of course, you will receive as much support as you need during the decision-making process and afterwards. This often saves several thousand francs in mortgage interest – per year, mind you.
The team of experts at MY HYPOTHECA looks forward to an initial consultation.
When extending your mortgage, it is important to consider how mortgage interest rates in Switzerland are likely to develop over the coming months and years. MY HYPOTHECA’s assessments can help you with this and also provide an overview of current trends on the mortgage market.
Resist the temptation to simply sign the first offer you receive from your bank. Take matters into your own hands at least one year before the expiry date or hire an independent mortgage advisor – you don’t have to do everything yourself in life. It’s worth it, because the advantages outweigh the disadvantages and you’ll save thousands of francs.