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In general, variable mortgages are a particularly flexible form of real estate financing. They do not have a fixed term and can be terminated at almost any time subject to a predefined notice period.

The interest rate for this type of mortgage loan is determined by general market conditions and decisions made by lenders. In contrast to fixed-rate mortgages that have the same interest rate throughout the entire term, variable mortgages are subject to fluctuations triggered by changes in market interest rates. If you decide to take out a mortgage with variable interest rates to finance your property, you should always bear in mind that interest rates may rise. At the same time, you benefit from flexibility with regard to amortization and mortgage terms. ÃÛ¶¹ÊÓƵ does not offer this specific product in this format, but it does have attractive alternatives, such as the SARON mortgage described below.

The SARON mortgage is also a type of mortgage with a variable interest rate, which means it’s also subject to fluctuations. It’s based on the backward-looking Compounded SARON (Swiss Average Rate Overnight) – the interest rate used when financial institutions borrow money overnight. A margin, which you agree upon with the lender, is then added to this rate. This results in the total interest costs.

To calculate the amount of interest due on the mortgage despite fluctuations, interest is charged at regular intervals. This usually takes place at the end of each quarter.

Variable mortgages and SARON mortgages both have variable interest rates that adapt to market conditions. The main difference between them is how these interest rates are calculated. The SARON is a transparent and publicly available interest rate based on actual transactions. It provides borrowers and clients with a comprehensible basis for determining and adapting mortgage interest rates.

In addition, if we compare the SARON mortgage with the alternative of a fixed-rate mortgage, the following advantages are evident:

The SARON mortgage is particularly flexible. In other words, there is no need to commit to an inflexible mortgage term and it’s easier to bridge shorter periods when you need financing. The notice period is usually 13 months, but it may also be shorter depending on the actual product chosen. If you decide that you need greater security and that interest rate fluctuations are not predictable enough, the SARON mortgage at ÃÛ¶¹ÊÓƵ can be converted into a fixed-rate mortgage within 10 calendar days. You can also choose to combine a SARON mortgage with a fixed-rate mortgage. In this way, only part of your interest costs will vary while the rest will remain constant. You can also contractually agree to directly amortize the mortgage through regular payments. And you can save on taxes by taking advantage of indirect amortization options.

However, this freedom also has some disadvantages. Financing costs are less predictable and depend on interest rates that are subject to fluctuations. If interest rates go up, your mortgage interest rate will increase too.

Both the variable mortgage and the SARON mortgage have variable interest rates. However, the SARON mortgage has the advantage that it is based on a publicly available and transparent interest rate. This makes it easy to understand for mortgage borrowers and is also the reason why ÃÛ¶¹ÊÓƵ offers this product.

Individual factors play a role when deciding between a SARON mortgage and a fixed-rate mortgage to finance real estate, such as the need for predictability and security.

If you want greater security, it’s advisable to choose a fixed-rate mortgage with a long term.

But there are also some very good reasons to choose a SARON mortgage. Choosing a mortgage with a short term gives you flexibility. If you suddenly get a job offer abroad or your family situation changes (divorce, children leave home, etc.), you can sell your home in the foreseeable future without incurring an early redemption penalty.

Furthermore, mortgage borrowers regularly have the option to react to interest rate changes and switch to a fixed-rate mortgage if necessary. It’s also possible to reduce the interest rate risk by combining different mortgage terms. And by diversifying your mortgage financing, you can avoid having to completely renew all of your financing at a time when interest rates are unfavorable. Regardless of whether a fixed-rate mortgage or a mortgage with a variable interest rate is best suited to your needs, we definitely recommend that you periodically review your mortgage strategy with a client advisor.