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Variable-rate mortgages. For special cases.
What is a variable-rate mortgage?
A variable-rate mortgage is a form of financing that has neither a fixed interest rate nor a fixed term. The lender is free to determine the interest rate, while the term is in principle unlimited and defined by a three- or six-month notice period. A variable-rate mortgage is the most expensive type of financing and is primarily utilised when the utmost flexibility is required. They are only considered in special cases, for example, when bigger repayments or a property sale are planned. Even if there are lots of unknown factors at the time the mortgage is taken out and the borrower is not yet in a position to decide on a mortgage solution, the variable-rate mortgage can be considered as a temporary solution.
What others wanted to know.
Our mortgage experts give an insight into a selection of the most frequently asked questions. Submit your own question. We will be happy to help you.
Adrien S. (36), Buchs
For which type of borrower does a variable-rate mortgage pay off?
Variable-rate mortgages are suitable if you are planning to make larger repayments on a regular basis or if you intend to sell the property. Due to the greater flexibility and the lack of a fixed term, variable-rate mortgages are also an ideal temporary solution, for example when you haven’t yet been able to come to a definitive decision on a mortgage solution. However, you should note that, unlike Saron mortgages, variable-rate mortgages do not have any transparent calculation basis and are often too expensive when interest rates are low compared to Saron or fixed-rate mortgages.
Nicolas W. (34), Prilly
What are the disadvantages of taking out a variable-rate mortgage?
When taking out a variable-rate mortgage, the risk of interest rate fluctuations in particular must be taken into account. Rising market interest rates can lead to higher monthly instalments as well as a steep rise in the total costs associated with the mortgage within a short space of time. The unpredictability of interest rate trends makes long-term financial planning more difficult, which is why borrowers considering this option should have the right level of risk tolerance as well as sufficient capital reserves.
Adrien S. (36), Buchs
For which type of borrower does a variable-rate mortgage pay off?
Variable-rate mortgages are suitable if you are planning to make larger repayments on a regular basis or if you intend to sell the property. Due to the greater flexibility and the lack of a fixed term, variable-rate mortgages are also an ideal temporary solution, for example when you haven’t yet been able to come to a definitive decision on a mortgage solution. However, you should note that, unlike Saron mortgages, variable-rate mortgages do not have any transparent calculation basis and are often too expensive when interest rates are low compared to Saron or fixed-rate mortgages.
Nicolas W. (34), Prilly
What are the disadvantages of taking out a variable-rate mortgage?
When taking out a variable-rate mortgage, the risk of interest rate fluctuations in particular must be taken into account. Rising market interest rates can lead to higher monthly instalments as well as a steep rise in the total costs associated with the mortgage within a short space of time. The unpredictability of interest rate trends makes long-term financial planning more difficult, which is why borrowers considering this option should have the right level of risk tolerance as well as sufficient capital reserves.
