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Many homeowners opt for fixed-rate mortgages with long terms. Mortgages over five or ten years are extremely popular. But what suits the majority is not always the best choice in individual cases.

Which term is best for you depends on individual factors. The first question to answer is what type of person you are. Is it important for you to be able to plan your budget reliably with fixed interest costs? Or do you value flexibility and want to benefit from low interest rates – with the residual risk that things might turn out differently than you expect?

Your life circumstances must also be taken into account. For example, if a couple is likely to be looking for a new property in a few years’ time when their children move out, a long mortgage term could prove to be an undesirable “shackle.”

Finally, your own personal assessment of the market also plays a role. If you expect interest rates to fall, you are probably better off with a short-term mortgage. You just need to be able to sleep well if interest rates rise unexpectedly.

The more security-conscious the borrower, the more advisable a fixed-rate mortgage with a long term. The advantage is obvious: it is possible to set a specific interest rate for several years. This makes future housing costs calculable over the agreed term and protects against the risk of interest rate changes.

Conversely, depending on the terms of the contract and the associated early redemption penalty, it may not be possible to cancel the mortgage and switch to a more favorable financing arrangement if interest rates fall. Even if your living circumstances change, for example as a result of divorce, and you have to sell your home, the mortgage will remain in force. If the buyer of your property does not take over the mortgage, an early redemption penalty will become due. However, situations like this must be examined individually in order for solutions to be found.

There are also good reasons for opting for a mortgage with a short term. Choosing a short term means you stay flexible. If you are suddenly tempted by a job offer abroad, you can sell your home relatively quickly without incurring an early redemption penalty.

In addition, you are free to react regularly to changes in interest rates as no one is stopping you from switching to another mortgage or another provider. To benefit from this, however, you need to keep up to date with market conditions, which requires a certain level of attention and expertise.

The mortgage market is dynamic. Nevertheless, two types of mortgage have become particularly widespread: fixed-rate (mortgages) and money-market (mortgages).

Fixed-rate mortgages

The most popular are fixed-rate mortgages with a fixed interest rate for the entire term. Traditionally, these run over a period of up to 10 years.

SARON mortgages (money-market mortgages)

Money-market mortgages are also a long-running type of mortgage. SARON mortgages in particular are gaining ground. Their interest rate is variable: it depends on the interest rate on the money market, which changes daily. These mortgages are based on the SARON (Swiss Average Rate Overnight), the benchmark interest rate for the Swiss money market. It replaced the LIBOR, which has not been used since 2021.

Contracts for money-market mortgages also usually have terms of one or more years. However, they are generally less expensive to liquidate than fixed-rate mortgages. There are also SARON mortgages without an “expiration date.” They run indefinitely and can be terminated subject to a certain notice period.

The classic variable mortgage model has been discontinued. This also has the benefit of variable interest rates and short terms. However, SARON mortgages are considered more transparent because a glance at the reference rate is enough to identify how your costs will change.

Whether you opt for a fixed-rate or SARON mortgage when financing your home ultimately comes down to your personal temperament: If you prefer to calculate with a stable fixed budget and don’t want any surprises in the event of an interest rate rise, a fixed-rate mortgage is the right choice. Once you have taken out this mortgage, the agreed parameters remain unchanged.

If you are more willing to take risks and want to benefit from possible interest rate cuts, we recommend you take out a SARON mortgage. Your interest rate, which is closely aligned with the official key interest rate of the Swiss National Bank (SNB), is usually adjusted every three months at the beginning of the quarter to the falling – or rising – SNB reference interest rate.