Swiss Adjustable-Rate Mortgages Explained

In contrast to fixed-rate mortgages (FRMs), an adjustable-rate mortgage (ARM) does not have a fixed mortgage term. That means you can terminate the mortgage at any time in keeping with the required notice period (typically three or six months).

Mortgage lenders usually waive the notice period if you exchange an adjustable-rate mortgage for a different mortgage from the same lender. Additionally, some Swiss banks and insurance companies have much lower minimum mortgage size requirements, compared to fixed-rate mortgage. Some do not have any minimum mortgage size for ARMs.

Adjustable-rate mortgages are not popular in Switzerland

Although they offer flexibility, adjustable-rate mortgages only have a niche presence in the Swiss mortgage market. The reason for this is that Swiss ARMs are expensive.

In the distant past, adjustable-rate mortgages were popular for home financing. At the time, the interest rates of ARMs were still decided on a political level, and until 2008 they were also used to determine rents. These factors made adjustable-rate mortgages an attractive means of financing real estate.

Swiss adjustable-rate mortgages are expensive

The annual interest rates of Swiss adjustable-rate mortgages range between 2.2. and 4 percent, with the average rate being 3.0 percent (as per September 2024). That makes them much more expensive than other kinds of mortgages.

Adjustable-rate mortgages can be used for both primary and secondary mortgages. The annual interest rates of ARMs for primary mortgages range between 2.2 and 3.9 percent, with the average rate being 2.9 percent. The interest rates of ARMs for secondary mortgages range between 3 and 4 percent, with an average rate of 3.5 percent.

The disadvantages of adjustable-rate mortgages

The high interest rates are the biggest disadvantage. Swiss ARMs are expensive. For all borrowers who are in a position to commit to longer, fixed mortgage terms, using a SARON mortgage or fixed-rate mortgage makes more financial sense.

The advantages of adjustable-rate mortgages

Adjustable-rate mortgages are suitable for Swiss property owners who require a great deal of flexibility with regard to repaying their mortgage. If you are not able to commit to a mortgage term of two years or more – as may be the case if you are selling a property – then an adjustable-rate mortgage is worth considering as an emergency solution.

Mortgages with long mortgage terms can be unfavorable in those situations. Adjustable-rate mortgages, on the other hand, can be terminated on short notice (after the property sells, for example).

The low minimum mortgage size requirements are another possible advantage. Some lenders do not require any minimum mortgage size at all, while others have a minimum of 50,000 or 100,000 francs.

Adjustable-rate mortgages also offer more flexibility when it comes to amortization. Making voluntary mortgage repayments above the contractually-defined payments is not normally possible with fixed-rate mortgages and SARON mortgages.

Compare mortgages

Always take time to compare different mortgage lenders. You can get a good overview of Swiss ARMs in the unbiased moneyland.ch mortgage comparison.

Tip: Some lenders are now offering SARON mortgages with conditions for mortgage terminations that are similar to those of ARMs. These SARON mortgages are much cheaper than most adjustable-rate mortgages.

More on this topic:
Swiss fixed-rate mortgages explained
SARON mortgage questions and answers
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