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Old 10.09.2019, 13:17
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Mortgage question. First tranche expires

Hi all

Quick explanation; so I have my mortgage in 2 tranches.
The smallest part expires soon and the other tranche in 5 years from now.

I am looking to extend the mortgage for the first clip. Ideally for another 5 yr. The bank I am with is giving me a real crappy rate, they obviously use their position of strength in this situation. Libor 1%. 5 year 1,16 %.

Obviously this is much lower in the 'normal' market, but I am stuck to the bank I guess, as I am obliged to stick with them for the first tranche.

Anything I can do to get a more competitive rate?
This situation really annoys me. It's not so much just the fact that it's not a great rate but it really is quite a bit higher than what I would get normally.

Happy to hear your thoughts. If only thing I can do is shut up and accept the situation that's what it is I guess...
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Old 10.09.2019, 13:26
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Re: Mortgage question. First tranche expires

i'm looking to get a mortgage and was considering splitting it between 5 year and 10 year tranches to keep them both rolling on a 10 year basis and average out the interest rate risk.

in the end, i'm looking at 10 year only as i'm concerned about poor rates when it comes to re-financing in 5 years and i have no other option but to repay or accept what the bank offers.

one thing you can try is to get alternative quotes and threaten to leave once the 10 year expires. whatever you finance, make sure both tranches can be refinanced on the same day.
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Old 10.09.2019, 13:43
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Re: Mortgage question. First tranche expires

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i'm looking to get a mortgage and was considering splitting it between 5 year and 10 year tranches to keep them both rolling on a 10 year basis and average out the interest rate risk.

in the end, i'm looking at 10 year only as i'm concerned about poor rates when it comes to re-financing in 5 years and i have no other option but to repay or accept what the bank offers.

one thing you can try is to get alternative quotes and threaten to leave once the 10 year expires. whatever you finance, make sure both tranches can be refinanced on the same day.



This is an idea punted by the banks to tie you in !!!


Unless you can pay your 5 year mortgage off when it comes around they will force you to remain with them as it is very diffcult to get two banks to accept each to give a mortgage on the same property.


Today the chance of interest rates going up is less than zero, they are talking about negative rates n saving accounts at present, so take 50% on fixed term and 50% at LIBOR, or alternatively all on LIBOR


Before the Swiss can increase interest rated, the US goes first, followed by the Europeans, and possibly the UK.....you'll have pletny of notice before they increase and you can then block it.
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Old 10.09.2019, 14:00
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Re: Mortgage question. First tranche expires

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Unless you can pay your 5 year mortgage off when it comes around they will force you to remain with them as it is very diffcult to get two banks to accept each to give a mortgage on the same property.
totally agree, which is why i said:

Quote:
in the end, i'm looking at 10 year only as i'm concerned about poor rates when it comes to re-financing in 5 years and i have no other option but to repay or accept what the bank offers.
Quote:
Today the chance of interest rates going up is less than zero, they are talking about negative rates n saving accounts at present, so take 50% on fixed term and 50% at LIBOR, or alternatively all on LIBOR
strangely the LIBOR is not at all attractive (i see one offer where it is similar to a 10 year fixed). where did all the libor + 0,25% go?

Quote:
Before the Swiss can increase interest rated, the US goes first, followed by the Europeans, and possibly the UK.....you'll have pletny of notice before they increase and you can then block it.
agree. though i guess one never knows how quickly this could happen in the end...
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Old 10.09.2019, 14:28
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Re: Mortgage question. First tranche expires

I'd go for LIBOR. If we're still this low in 5 years then you can renegotiate the whole loan.

The key is to watch the ECB. The SNB has publicly stated it will be "at least" 6-9 months behind the ECB in raising rates. For now it looks as if they will be lowered. However, when the ECB does raise rates, forward rates (on which mortgages are based) will also rise.

What happened to LIBOR +.25%? At that rate the banks would be paying us to borrow money, and so to make money and fill their coffers, most have a LIBOR offering between 0.80% and 1%.
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Old 10.09.2019, 14:50
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Re: Mortgage question. First tranche expires

You are not exactly bound to your bank, it just costs money to step out from the existing mortgage. In German, it's called "Vorfälligkeitsentschädigung", the compensation to the bank for early termination. Officially, it's calculated as a difference between the rate you are paying, and today's average mortgage rates, multiplied by remaining years. So, theoretically, you should loose nothing in a long run if you switch the bank and get lower rate for both tranches.
However, in reality, banks do some tricks in these calculations. Mine calculated the penalty that was higher than all complete mortgage interest for the remaining period (complete! not the difference!)
You can "scare" your bank by asking to calculate the "Vorfälligkeitsentscädigung" for the remaining period of 2nd tranche, if you step out now. Make sure to ask them for detailed one, with explanation of every number there. Then you can see what's more profitable (of course if you already have a mortgage offer from another bank)
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Old 10.09.2019, 15:08
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Re: Mortgage question. First tranche expires

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agree. though i guess one never knows how quickly this could happen in the end...



You'll soon know about it and you'll have plenty of notice.


You can get LIBOR 3 month mortgages at less than 0.5% today.
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Old 10.09.2019, 15:11
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Re: Mortgage question. First tranche expires

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You'll soon know about it and you'll have plenty of notice.


You can get LIBOR 3 month mortgages at less than 0.5% today.
Once I hear about it, wouldn't the whole mortgage curve move instantly?

I also saw 5-10 year fixes from around 0.5% to 0.75%. Pretty crazy. I don't think lower rates can stimulate housing more since interest is practically zero now anyway. I feel it is more down to how long the low rates will last and the high asset prices that need to be paid. Surely we crested the house price peak now?
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Old 10.09.2019, 15:11
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Re: Mortgage question. First tranche expires

That is rubbish. You take a mortgage with the bank, lets say Chf 500'000.-- at 1% for 10 year, the bank goes to the money markets and borrows Chf 500'000.-- for 10 years at -0.5%, the spread or the commission for the bank is 1.5%, minus a few fees and expenses.


The mortgage is back to back so if you want to get out for whatever reason, after say 5 years, they will calculate 1.5% on Chf 500'000.-- x 5 years.



Beware, a lot of banks have clauses not allowing you to get out to change to a different provider, i think the UBS mortgages are a bit like this, you really need to read and understand the paperwork, the banks are lower than snakes in general.
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Old 10.09.2019, 15:14
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Re: Mortgage question. First tranche expires

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That is rubbish. You take a mortgage with the bank, lets say Chf 500'000.-- at 1% for 10 year, the bank goes to the money markets and borrows Chf 500'000.-- for 10 years at -0.5%, the spread or the commission for the bank is 1.5%, minus a few fees and expenses.


The mortgage is back to back so if you want to get out for whatever reason, after say 5 years, they will calculate 1.5% on Chf 500'000.-- x 5 years.



Beware, a lot of banks have clauses not allowing you to get out to change to a different provider, i think the UBS mortgages are a bit like this, you really need to read and understand the paperwork, the banks are lower than snakes in general.
I noticed UBS restricted a lot their mortgages too. Previously the LIBOR was repayable at each quarter end. The latest contract I saw (but didn't sign) has a lock in period (e.g. 3 years) where you can't get out without penalty (much like fixed interest/term mortgages).
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Old 11.09.2019, 16:06
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Re: Mortgage question. First tranche expires

https://www.ubs.com/ch/en/swissbank/...hing-bank.html

From UBS page encouraging switching to them:

"I have several fixed-rate mortgages with different maturities. Can I still switch them?
Yes, this is possible. Since the mortgage notes acting as collateral are often not tied to individual mortgage tranches, they can either be released early to the repaying bank in exchange for a promise to pay, or divided up, which will result in certain costs (generally borne by the client).
We will be happy to support you when you repay your mortgage and switch to UBS."

I assume this would work the same way in reverse.
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Old 11.09.2019, 23:26
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Re: Mortgage question. First tranche expires

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https://www.ubs.com/ch/en/swissbank/...hing-bank.html

From UBS page encouraging switching to them:

"I have several fixed-rate mortgages with different maturities. Can I still switch them?
Yes, this is possible. Since the mortgage notes acting as collateral are often not tied to individual mortgage tranches, they can either be released early to the repaying bank in exchange for a promise to pay, or divided up, which will result in certain costs (generally borne by the client).
We will be happy to support you when you repay your mortgage and switch to UBS."

I assume this would work the same way in reverse.

This maybe the case, but they will make you pay heavily for the privilege and it needs to be included in the wording of the agreement.
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