How to choose your mortgage?

• Understanding the 3 main types of mortgages in Switzerland
• Your 6-step decision method
• Examples to choose between fixed rate, SARON and mixed mortgage
• Reading interest rates without asking the wrong question
• Practical recommendations for a truly suitable mortgage

Understanding the 3 main types of mortgages in Switzerland

Before you look for the “best” mortgage, you need to define what “best” actually means for you: the lowest rate today, or the mortgage that remains sustainable for several years, even if rates rise or your situation changes. A suitable mortgage is one that matches your property project, your risk tolerance and your intended holding period.

Fixed-rate mortgage: security and planning

A fixed-rate mortgage is a loan where the interest rate is set for an agreed term (often 2, 5 or 10 years, sometimes longer). This gives you a stable monthly payment (interest charge) and therefore excellent predictability. The trade-off is that if rates fall after you sign, you do not automatically benefit from the decrease.

One important point to understand from the outset: in Switzerland, a fixed-rate mortgage is generally a contract with a fixed term. If you wish to exit before maturity (sale, divorce, relocation), you risk an early termination fee (often called a break fee). This fee depends on the contractual rate, the market rates at the time of exit and the remaining term.

SARON mortgage: a variable rate indexed to the market

A SARON mortgage (variable money-market rate) is a model where the interest you pay is based on a Swiss money-market reference rate, the SARON, plus a margin (“spread”) negotiated with the lender. In practice: SARON rate + margin, recalculated periodically (often quarterly, depending on the contract).

One clarification: the SARON is a reference rate; your final rate almost always includes a fixed margin specific to your file (equity, income, property, debt ratio, quality of insurance, etc.). The SARON can go up or down; your margin usually remains stable for a given period.

This model is often chosen when you accept some variability in exchange for potentially lower total costs over time, especially when the market is stable or trending downwards. The drawback is obvious: if rates rise, your interest burden increases quickly.

Mixed mortgage: combining fixed and SARON to smooth risk

A mixed mortgage (often called a combined mortgage) splits the financing between a fixed-rate tranche and a SARON tranche. For example: 60% fixed for 10 years and 40% SARON. The idea is simple: you lock in part of the risk (the fixed tranche) while keeping a flexible part (the SARON tranche) to benefit from possible rate cuts and maintain flexibility.

This choice is often relevant if you are hesitating between security and flexibility or if you want to avoid an “all or nothing” decision. Properly designed, a mixed mortgage can be a suitable solution for an intermediate situation: overall comfortable budget, but no desire to expose 100% of the debt to rate increases.

Your 6-step decision method

To choose your mortgage properly, avoid starting from a rate you “saw on the internet”. Instead, start from a reproducible method that leads to a coherent choice – in other words, a practically sound mortgage. A professional mortgage broker (free of charge) can guide you through this process.

Step 1: define your horizon (probable holding period)

Your horizon is the period during which you expect to keep the property and/or maintain the same strategy. If you say “we might sell in 3 years”, a 10-year fixed-rate mortgage becomes more delicate because of the risk of early termination. If you are almost certain you will keep the property for 10 years, a longer fixed term becomes more natural.

Useful tip: distinguish between the “property holding period” and the “desired commitment period”. You may keep the property for 15 years while reassessing your strategy every 3 to 5 years (for example by splitting into tranches).

Step 2: measure your tolerance to variability

This is about your ability to absorb an increase in mortgage rates without financial stress. One simple approach: take your debt (e.g. CHF 700,000) and simulate a rise of +1% and then +2% on the variable portion. Chart 2 illustrates this mechanism (schematic example). If the impact seems “manageable”, a SARON mortgage (fully or partially) remains an option. If it makes you uncomfortable, a fixed rate becomes more attractive.

In your budget, also build in a buffer: a monthly safety margin that does not depend on an optimistic scenario (bonus, salary increase, etc.).

Step 3: analyse your risk profile (income, family, assets)

Your profile changes what a “good mortgage” means for you. Common examples:

• Stable, high income and strong saving capacity: you can take on more variability, so more SARON exposure (if you accept it psychologically).
• Stable but tight income, little monthly room for manoeuvre: a fixed rate (or a mixed mortgage with a large fixed component) offers more peace of mind.
• Growing family, additional expenses (childcare, school, health): planning tends to take priority.
• Significant liquid assets: variability is less of an issue because you can absorb shocks.

An important distinction from the outset: liquidity (available cash) is not the same as total wealth. An “expensive” property does not pay your monthly interest. For a SARON mortgage, liquidity and a financial buffer matter a great deal.

Step 4: compare under constant scenarios (not just today’s rate)

When you compare fixed and SARON mortgages, the temptation is to pick the lowest rate “today”. But that is not a method. Instead, compare:

• a “stable” scenario (rates similar to today),
• a “rising” scenario (+1% to +2%),
• a “falling” scenario (if you see it as plausible).

The goal is to see which option remains a suitable mortgage under less favourable conditions. You are not looking for perfection; you are looking for robustness.

Step 5: decide whether to split (mixed strategy)

Splitting is often underestimated. A mixed mortgage can also be seen as a diversification strategy: you reduce the risk of “bad timing”. For example, if you fix 100% when rates are high, you lock in that cost for a long time. If you leave 100% in SARON just before a rate hike, you feel the increase immediately.

A classic (purely illustrative) split:

• 50% fixed / 50% SARON: simple balance,
• 70% fixed / 30% SARON: priority on stability,
• 30% fixed / 70% SARON: priority on expected cost (with a solid buffer).

Your mortgage type can therefore be “mixed” even if your bank describes it as “two separate tranches” (one fixed and one SARON). Be careful not to confuse this with first- and second-rank mortgages.

Step 6: negotiate and check the clauses

People tend to focus on the rate, but a better mortgage also depends on the clauses:

• frequency of SARON adjustments and calculation method (average, period),
• margin applied and conditions under which it can be reviewed,
• fees and termination rules (especially for fixed rates),
• options to split, convert or extend tranches,
• terms of amortisation (direct/indirect) and flexibility.

A poorly understood clause can cost more than a 0.10% difference in the rate.

Concrete examples to choose between fixed rate, SARON and mixed mortgage

The examples below are illustrative (they help you understand the mechanisms). They show how choosing your mortgage can become intuitive as soon as you think in terms of scenarios.

Example A: couple with tight budget and long-term project

Property price CHF 900,000, equity CHF 180,000, mortgage CHF 720,000. The couple has stable income but little monthly margin. Goal: sleep well at night and avoid a payment that fluctuates too much.

• Natural option: fixed rate (or mixed mortgage with a strong fixed component).
• Why: budget stability is worth more than a potential gain if rates fall.
• Reasonable variant: 70% fixed / 30% SARON, if the couple wants to keep some flexibility.

Here, the suitable mortgage is the one that reduces the likelihood of financial stress, not the one that aims for the lowest theoretical cost on paper.

Example B: high income, strong savings capacity, risk acceptance

Mortgage CHF 800,000, comfortable monthly savings capacity, significant liquid reserves. The person accepts that a variable rate can rise and wants to keep the option to convert if needed.

• Natural option: SARON or mixed mortgage (with a SARON bias).
• Why: variability is bearable and the potential long-term savings can be attractive.
• Point to watch: keep a buffer and set a clear rule (“if rates rise by +1.5%, I switch part to fixed”).

This profile can often obtain a suitable SARON mortgage, provided it does not confuse “I can pay” with “I am comfortable”.

Example C: uncertainty about a sale or renovation

You are considering a major renovation project in 2 to 4 years, or a potential sale (job relocation). You want to limit the risk of a break fee.

• Natural option: SARON or short-term fixed rate (2–3 years), or a mixed mortgage with a small fixed tranche.
• Why: greater flexibility if you need to reorganise your financing.
• Point to watch: if your budget does not tolerate variability, compensate with a larger buffer or a higher fixed share.

In this case, choosing your mortgage mainly means managing contractual risk (exit, refinancing) as much as interest rate risk.

Reading interest rates without asking the wrong question

A common mistake is to believe that there is a single “best mortgage” for everyone. In reality, rates vary by term and market conditions, and offers vary by borrower profile.

Chart 1 helps you (schematically) visualise two important ideas:

• fixed rates can stay low for a long time and then rise quickly over certain periods;
• the SARON can be very low (even negative in some periods) and then adjust sharply upwards when monetary policy changes.

The practical point: do not base your choice on the last decimal place. Base it on your ability to cope with variability and on your time horizon.

Practical recommendations for a truly suitable mortgage

To conclude, here is an actionable summary of how to choose your mortgage without getting lost in the details.

• You want stability (tight budget, family, limited buffer): favour a fixed-rate mortgage or a mixed mortgage with a strong fixed component.
• You accept variability (large margin, reserves, discipline): a SARON mortgage is possible, otherwise a mixed mortgage with a SARON bias.
• You face uncertainty (sale, renovation, life change): SARON or short-term fixed rate; avoid locking yourself into a long fixed term without a plan B.
• You hesitate: a mixed mortgage is often the best practical answer, because it reduces the risk of bad timing.

Finally, remember that optimising a mortgage also involves negotiating the margin, exit conditions and tranche structure, not only the mortgage type. Look for a professional mortgage broker in your area to make the process and negotiations with several lenders easier.

Disclaimer: this content is provided for information and educational purposes only. It does not constitute financial, legal or tax advice, nor a credit offer. Actual conditions (rates, margins, fees, penalties) depend on your situation, the property being financed and the lender’s policy. Before signing, compare several offers and have the key contractual clauses (term, early exit, SARON calculation, margin, amortisation) reviewed.