How to structure your mortgage in order to better take advantage of the different mortgage rates?

by Kevin Rossier, www.hypo-advisors.ch

Once you have chosen the mortgage lender you need to address the question of how best to structure the loan.  Should we favour a mortgage loan with different tranches and different interest rates?

The answer to this question depends on two main factors: your risk appetite and the current interest rate scenario.

How should you decide on what interest rate tenor to accept?

This will depend on your expectation for rate increases or drops in the medium or long term as well as what incremental expense you can comfortably accommodate in the event of an upward or downward move.

In a low interest rate environment it is common for the borrower to opt to freeze the interest rate for the entire tenor of the loan while in the context of an expected reduction in interest rates the borrower will be more inclined to keep various tranches of the loan with a floating interest rate to take advantage of potential interest rate reductions.