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  #21  
Old 01.09.2015, 10:56
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Re: How to structure the mortgage?

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Someone correct me if I am wrong, but I thought that one big benefit of splitting your mortgage is to avoid nasty refinancing surprises at the end of the period.
It's what I did. Four mortgages fixed for 8,6,4,2 years. Every two years we get to decide what to do.
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  #22  
Old 01.09.2015, 11:29
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Re: How to structure the mortgage?

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And I would also make sure to be investing elsewhere, as of course most of that "pension" pot is now nothing of the sort, it's a deferred mortgage payment.
I am thinking of having two Pillar 3a accounts at different banks.
One for the mortgage (1% amortization) and another one to use the full tax-free allowance.

I'm currently leaning towards having the full 1st mortgage fixed for 8/9/10y and the 2nd mortgage with LIBOR. In case of any ugly events unfolding short term I will be able to pay back the 2nd mortgage in cash and in 8 years from now I should also have enough saved to reduce my exposure.
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  #23  
Old 01.09.2015, 11:34
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Re: How to structure the mortgage?

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Someone correct me if I am wrong, but I thought that one big benefit of splitting your mortgage is to avoid nasty refinancing surprises at the end of the period.

If you have a 1m chf mortgage with 10 year fixed and by the end of it, rates are at 5%, you will have to refinance the remaining amount at 5%, ouch.

If you have a 5 year and 10 year split, and rates are 5%, you only have to initially refinance half the remaining amount at the higher rate.

Of course, you could say that the ten year fix would be good in that case because you got the whole period at a low initial rate, but that was the way it was explained to me.

Of course, I'll wait for more experienced hands to comment on this.
Yes, exactly right but with a split mortgage it is very difficult to change banks without paying a penalty on the bit which is left and as you cannot easily have 50% with one bank and 50% by the other, your bank has you by the short and curlies......
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  #24  
Old 01.09.2015, 11:42
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Re: How to structure the mortgage?

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I am thinking of having two Pillar 3a accounts at different banks.
One for the mortgage (1% amortization) and another one to use the full tax-free allowance.

I'm currently leaning towards having the full 1st mortgage fixed for 8/9/10y and the 2nd mortgage with LIBOR. In case of any ugly events unfolding short term I will be able to pay back the 2nd mortgage in cash and in 8 years from now I should also have enough saved to reduce my exposure.
Why bother splitting them? Once you reach the right amount in the 3a you can simply tell the bank you're done and open one elsewhere.

In any case the 3a is just a guarantee to the bank that you are making the amortization possible; you can choose to pay by cash or anything else at a later point.

However, I've heard that you should split your 3a into separate accounts over time (even at the same bank), as you can only cash in one account fully and you don't want a big tax hit in one year.
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  #25  
Old 01.09.2015, 12:05
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Re: How to structure the mortgage?

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Why bother splitting them? Once you reach the right amount in the 3a you can simply tell the bank you're done and open one elsewhere.

In any case the 3a is just a guarantee to the bank that you are making the amortization possible; you can choose to pay by cash or anything else at a later point.

However, I've heard that you should split your 3a into separate accounts over time (even at the same bank), as you can only cash in one account fully and you don't want a big tax hit in one year.
My way of thinking is that if I agree for let's say, 1.5% amortization this is what I have to pay. If I agree for 1%, I only have to pay 1%, and the remaining 0.5% as I wish.
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  #26  
Old 01.09.2015, 12:32
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Re: How to structure the mortgage?

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My way of thinking is that if I agree for let's say, 1.5% amortization this is what I have to pay. If I agree for 1%, I only have to pay 1%, and the remaining 0.5% as I wish.
I assume you actually mean "1% into the P3a", you won't really be amortizing at this stage.

The theory is that with that 1% each year, when you do have to pay off the amortization bit the bank is comfortable that it will be available.

If you pay more into the P3a anything left over after amortization is yours, or you could choose to pay the amortization some other (potentially more tax efficient) way and leave the P3a alone.

Personally I wouldn't bother having two P3a simply to keep the amortization account separate, it's just more admin hassle.
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  #27  
Old 01.09.2015, 13:12
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Re: How to structure the mortgage?

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Someone correct me if I am wrong, but I thought that one big benefit of splitting your mortgage is to avoid nasty refinancing surprises at the end of the period.

If you have a 1m chf mortgage with 10 year fixed and by the end of it, rates are at 5%, you will have to refinance the remaining amount at 5%, ouch.
the way i look at it, with a 10 year fix, you have 10 years to prepare for it. with a 5 year fix, you only have 5 years.

if the plan is to keep refinancing forever and you're not ever expecting IRs to increase from these historical low levels, then perhaps the plan isn't so realistic.
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  #28  
Old 01.09.2015, 13:46
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Re: How to structure the mortgage?

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If rates are 5% in 10 years time, it won't be a big surprise after 5/7/10, you should assume interest rates will be 5% or more. In the end after all the money printing inflation will come.

If that were true inflation would already be here (if they would stop changing the way inflation is calculated). BTW Zimbabwe is still a country
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  #29  
Old 01.09.2015, 13:49
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Re: How to structure the mortgage?

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You will never have time to react to surprise moves by the SNB, your memory is very short indeed.

you mean a surprise move from -0% to +0.5%?
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  #30  
Old 01.09.2015, 13:55
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Re: How to structure the mortgage?

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If that were true inflation would already be here (if they would stop changing the way inflation is calculated). BTW Zimbabwe is still a country
Why? In the case of the SNB printing money, inflation would be caused by excess money supply. But all that money is being held by foreign parties, it currently has little impact on the Swiss economy.

When the franc depreciates and it all gets cashed in, that's when the impact may happen.

And WTF has this got to do with Zimbabwe, which doesn't even have a functioning currency?

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you mean a surprise move from -0% to +0.5%?
No I think he means a surprise move to negative interest rates or dropping a firmly held exchange rate floor.
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  #31  
Old 01.09.2015, 19:27
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Re: How to structure the mortgage?

I thought I'd give you an update.

I just signed the papers
2/3rds 9y fixed @ 1.66%
1/3rd LIBOR @ 0.9%

Happy
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  #32  
Old 01.09.2015, 19:47
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Re: How to structure the mortgage?

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I thought I'd give you an update.

I just signed the papers
2/3rds 9y fixed @ 1.66%
1/3rd LIBOR @ 0.9%

Happy
First class choice, you got the best of all worlds !
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  #33  
Old 01.09.2015, 20:50
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Re: How to structure the mortgage?

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Why? In the case of the SNB printing money, inflation would be caused by excess money supply. But all that money is being held by foreign parties, it currently has little impact on the Swiss economy.

When the franc depreciates and it all gets cashed in, that's when the impact may happen.

And WTF has this got to do with Zimbabwe, which doesn't even have a functioning currency?



No I think he means a surprise move to negative interest rates or dropping a firmly held exchange rate floor.
i give up you are too smart for me
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  #34  
Old 01.09.2015, 20:58
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Re: How to structure the mortgage?

The banks recommend what's best for them.
Why wouldn't they?
We went for straight 10 yr. 1.5% fixed.
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  #35  
Old 02.09.2015, 00:12
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Re: How to structure the mortgage?

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I thought I'd give you an update.

I just signed the papers
2/3rds 9y fixed @ 1.66%
1/3rd LIBOR @ 0.9%

Happy
thanks for the update. sounds like a good deal. who was the provider?
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  #36  
Old 02.09.2015, 08:49
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Re: How to structure the mortgage?

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thanks for the update. sounds like a good deal. who was the provider?
One *very large* bank which doesn't publish rates online.

it took a bit of negotiating, but in the end it looks as I got an as good or better as anywhere else and no tricks involved.

I probably shouldn't have bothered asking around. Many of the cheapest online advertised offers come with strings attached such as a very expensive 2nd mortgage and/or requirement to purchase additional insurance products. In the end the effective rates come out nowhere near as good as it may seem at first sight.
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  #37  
Old 02.09.2015, 10:05
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Re: How to structure the mortgage?

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One *very large* bank which doesn't publish rates online.

it took a bit of negotiating, but in the end it looks as I got an as good or better as anywhere else and no tricks involved.

I probably shouldn't have bothered asking around. Many of the cheapest online advertised offers come with strings attached such as a very expensive 2nd mortgage and/or requirement to purchase additional insurance products. In the end the effective rates come out nowhere near as good as it may seem at first sight.
Did you get a cap (upper ceiling) on the Libor mortgage ?
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  #38  
Old 02.09.2015, 10:24
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Re: How to structure the mortgage?

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Did you get a cap (upper ceiling) on the Libor mortgage ?
No, this option was not offered. I think Postfinance sells LIBOR with CAP, but it's considerably more expensive (1.3% pA).

I preferred to limit my LIBOR exposure for peace of mind.
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  #39  
Old 27.10.2015, 19:59
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Re: How to structure the mortgage?

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The banks recommend what's best for them.
Why wouldn't they?
We went for straight 10 yr. 1.5% fixed.
Which bank gave you that?

I just asked today for the firs time my bank (post finance) about mortgages, just to start learning about it, and it seems like they would offer me 1.85% for a fix, 10y mortgage. The rate would go down a bit if I would downplay more than 20%, but not below a minimum of 1.7%... he also told me they had the lowest IR around
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  #40  
Old 27.10.2015, 20:12
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Re: How to structure the mortgage?

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Which bank gave you that?

I just asked today for the firs time my bank (post finance) about mortgages, just to start learning about it, and it seems like they would offer me 1.85% for a fix, 10y mortgage. The rate would go down a bit if I would downplay more than 20%, but not below a minimum of 1.7%... he also told me they had the lowest IR around

Strange at the moment!


Currently the Swiss central bank (SNB) rate is much lower than the Europe central bank (ECB) rate but the 10 year German bank mortgage rates published are lower than the 10 year Swiss bank mortgage rates.


Theoretically the 10 year Swiss bank mortgage rates should be around 1% to 1.3%.


Currently the Swiss 10 year bond yield is around -0.38%.


Bandits!!
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