Choosing between a fixed-rate and a SARON mortgage is not simply a question of which rate is lowest today. The decision depends on payment certainty, flexibility, ownership plans, reserves and the ability to absorb higher costs.

How they work

A fixed-rate mortgage sets interest for an agreed term. A SARON mortgage usually links interest to compounded SARON plus a lender margin, so payments can change. Floors, reset dates, conversion rights, notice periods and early-exit costs depend on the contract.

Worked comparison

Assume a CHF 800,000 mortgage. A fixed offer is 2.2%, while a SARON structure is currently 1.4% including margin. Annual interest would be CHF 17,600 fixed versus CHF 11,200 SARON. If the SARON cost rises to 3.2%, annual interest becomes CHF 25,600—CHF 8,000 more than the fixed option. These figures exclude amortisation and other ownership costs and do not predict future rates.

Which structure may fit?

Fixed financing may suit a household with limited budget flexibility, a long expected holding period and a preference for predictable payments. SARON may suit a borrower with reserves, income capacity and tolerance for changing costs. Neither guarantees the lowest total cost.

Contract and refinancing risks

Fixed mortgages can be costly to terminate before maturity. SARON products may offer conversion or notice flexibility, but this is not automatic. Splitting a mortgage can diversify rate exposure but creates different maturity dates and may complicate refinancing.

Stress-test the choice

  • Calculate costs at the offered rate.
  • Repeat at a higher SARON or refinancing rate.
  • Include amortisation, maintenance, insurance and property charges.
  • Test sale, refinancing and loss-of-income scenarios.

Questions for the lender

  • How is SARON calculated and what margin applies?
  • Is there a floor or cap?
  • What are conversion and early-exit costs?
  • Can the mortgage transfer to another property?
  • How do maturity dates affect refinancing?

How Valory can help

Valory Deals helps compare financing assumptions and their effect on affordability and returns. Valory Properties helps owners organise mortgage information and monitor ongoing property costs.

This content is provided for general informational purposes and does not constitute legal, tax, financial or investment advice. Mortgage rates, contracts and outcomes vary by lender and individual situation.