Mortgage loan

Published by : dl

Mortgage loans

A mortgage loan is a long-term credit, guaranteed by a right to real estate lien. This credit involves a payment (in theory a one-time transfer of funds) to the debtor. The debtor is responsible for paying interest and eventual amortisations according to the contract terms.

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Fixed rate

The fixed rate allows you to precisely calculate your budget given that it doesn't change during the chosen period. Following the evolution of the estimate (policy of the Swiss National Bank) and the rate projections, short-term fixed rates could be higher than the variable rate.

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Variable rate

This rate varies depending on the capital and monetary markets. Therefore, it can be increased or decreased at any time. The impact of these modifications are sometimes not felt until later. In 1991, these rates reached an all-time high at 7.5% even 8% for a short period.

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LIBOR

This form of mortgage credit is directly linked to the European monetary market. Based on the LIBOR (London interbank offered rate), the rate is adopted every 3, 6 or 12 months. The bank adds a margin to this rate that is calculated for each individual client. Some financial institutions offer insurance against the rise in rates by means of derivatives.

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Fixed annuities

Fixed annuities are a type of variable rate mortage loan that you can contract for an undetermined amount of time. The objective is the maintain constant charges (interest and amortisation), even if the interest rate changes. If the interest rate goes up, the amortisation will go down and vice versa.

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Interest rate cap

A mortgage calculated with a capped interest rate protects you from excessive rate increases. With a fixed ceiling set at the beginning and effective throughout the loan term, you benefit from rate decreases without worrying about increases.

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Environmental bonus

With an environmental mortgage, the bank seeks to support renovation projects that save energy through sustainable means. The ecological mortgage is paid following the presentation of energy bills.

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Initial or start-up bonus

The mortgage with an initial or start-up bonus only applies to people who are becoming owners of their own residence for the first time. This bonus is not applicable to loan repayment or to rental or commercial buildings, nor to secondary residences.

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Terminate a fixed-rate loan

In the case of terminating a fixed-rate mortgage before the loan expires, the financial institutions will require a penalty or an exit indemnity.

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Multi-layered mortgage loans with various durations

Once mortgage financing is obtained, the future owner will be faced with the question of interest-rates. Again, the most common possibilites are variable rates, LIBOR, and fixed rates.

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