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Old 04.10.2020, 12:13
LuganoPirate LuganoPirate is offline
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Re: Pre payment on your mortgae

A bank will usually lend 80% of their valuation, which is often 10 - 15% below the market valuation. A mortgage is then given on the 80% for a fixed term curently +- 1%. For the difference they set up a second mortgage which is at a higher rate, ie. their standard variable mortgage rate, which in the case of Raiffeisen is currently 2.625%. This has to be repaid within 15 years but can be payed down or off at any time.

This second part can also be converted to a fixed term, if for example you make renovations or improvements which substantially increase the property's value, for instance by adding another floor, a garage etc. As long as the valuations (and your income ratio) stack up, the bank will often finance this at the standard rate and when finished convert all the loans into a fixed term loan.
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