5 tips on mortgages

1. Forget the rate forecasts

It is better not to try to make predictions. Even the most renowned institutions and experts find it difficult to forecast rates in a correct way. For this reason it is not advisable to wait for the moment «perfect for lighting a mortgage. Those who do not want to be interested in the interest rate situation or who can not or do not want to cope with rising interest rates should immediately assure the current extremely advantageous long-term conditions.

2. Estimate the mortgage amount correctly

Nobody is happy to have debts. However, a mortgage (or better loan in pawn) of the lowest possible amount is not always the best solution. In fact, the amount of the mortgage not only affects the amount of interest, but also has tax consequences. In fact, debit interest can be deducted from taxes and the amount of the mortgage is deducted from the assets. Who repays the mortgage altogether, if on the one hand no longer pays the mortgage interest rates, must however take into account higher income taxes at home of their own rental value.

It is also important to keep in mind that the purchase of a house can also imply other costs not budgeted. For example, new furniture, the need for a change in habits to move (second car) or renovations or repairs to the property. For these reasons, after buying a property and taking into account all the costs associated with it, you should have at least 5 percent of the value of the property in liquid reserves.

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3. Attention to the tranches

Financial institutions often suggest their clients to split the mortgage into several tranches. Their motivation is that without the tranches, depending on the evolution of rates, the entire mortgage must be renewed on less favorable terms. Of course, the effect of minimizing risk is desirable, but it also has its price.

If you have, for example, two tranches of five and ten years, you need to refinance after five years. At that moment, your financial institution will naturally make its offer. However, if you do not remain satisfied, you will still have to live with the proposed offer even if far worse than those available on the market. The reason lies in the fact that from an economic point of view it is not sensible to divide a mortgage on two different financial institutions or better, because the banks do not guarantee any subordinated credit.

Therefore, splitting into tranches is only advisable if you are able to amortize the maturing tranche. This reinforces its position of favorable negotiation with the financial institution.

4. Do not forget to cancel the mortgage (fixed rate!)

Notwithstanding an established expiry date, a fixed rate mortgage must also be terminated. If you are not actively interested, in most cases the fixed-rate mortgage maturing is converted into a variable rate (more expensive) mortgage. It is not even possible to switch to a cheaper bidder immediately. It is therefore important to immediately check your contract (cancellation period) and mark a reminder on the agenda, well before the cancellation deadline.

5. No contract without first having compared

When it comes to buying products and services, price and performance comparison is usually part of the standard procedure. A fortiori in the sphere of mortgages, given the high amounts involved, it is particularly convenient to compare the conditions; yet many customers often seem to be satisfied with the first offer that happens. There is no other financial area in which you deserve more to compare the conditions of that of mortgage operations. Experience shows that a Swiss customer can save between 5,000 and 20,000 francs by signing a mortgage, thanks to a comparison and good negotiation skills (or by having someone deal with him).

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