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  • Fixed-Rate vs. SARON Mortgage
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Fixed-Rate vs. SARON Mortgage

Compare fixed-rate and SARON mortgage: costs, risk, and break-even under various interest rate scenarios.

Choosing between a fixed-rate mortgage and a SARON mortgage is one of the most important financial decisions for homeowners. The fixed-rate mortgage offers planning certainty; the SARON mortgage is often cheaper -- but carries interest rate risk.

Related Calculators

Affordability Calculator

Can I afford the mortgage? Imputed costs vs. 1/3 of gross income according to banking guidelines.

Amortise or invest?

Comparison: pay off mortgage vs. invest capital. Tax effect, interest savings, returns, and net advantage over time.

Indirect Amortisation

Comparison: pay off mortgage directly vs. indirectly via pillar 3a. Tax savings, capital accumulation, and net advantage.

Fixed-rate mortgage: security comes at a price

With a fixed-rate mortgage, the interest rate is locked in for the entire term (2-15 years). The bank charges a premium for the rate lock -- the longer the term, the higher the premium. Advantages: Planning certainty, no interest rate risk Disadvantages: Higher rate than SARON, exit costs for early termination, refinancing risk at maturity

SARON mortgage: cheaper but variable

The SARON mortgage (formerly: Libor mortgage) is based on the Swiss Average Rate Overnight plus a bank margin (0.7-1.2%). The rate is adjusted every 1-3 months. Advantages: Historically cheaper, can be terminated at any time (3-6 months notice), benefits from rate cuts Disadvantages: Interest rate risk, less predictable, can become more expensive than fixed if rates rise

Historical comparison

Historically, the SARON/Libor mortgage was cheaper than the fixed-rate mortgage of the same term in the vast majority of 5-year periods (source: VZ Vermoegenszentrum). The interest advantage averaged 0.5-1.0%. However: during periods of rising rates (2022-2023), the SARON mortgage could become significantly more expensive within a few months.

Frequently Asked Questions

What term should I choose for the fixed-rate mortgage?+
Can I combine fixed and SARON?+
What does early termination of a fixed-rate mortgage cost?+