Oskar Kaufmann lives in an apartment he owns in Baar (ZG). The value of the property is CHF 900,000. The property has been financed with a mortgage of CHF 550,000.
At 20%, the affordability of the property is guaranteed. Oskar Kaufmann has amortized his mortgage indirectly by paying into his UBS Fisca account (pillar 3a). His pledged Fisca credit stands at CHF 150,000. No retirement savings have been withdrawn or pledged from pillar 2.
Oskar Kaufmann currently has a mortgage mix which consists of a 3-month Libor Mortgage and a 10-year Fixed-Rate Mortgage. Because the term of his UBS Fixed-Rate Mortgage is due to end next month, he has decided to optimize his mortgage mix.
Oskar Kaufmann's mortgage profile
Oskar Kaufmann has a long-standing banking relationship with UBS. Mr. Kaufmann takes an interest in the money and capital markets, and employs a hands-on approach to the financing of his home. He has, for example, an equity portfolio, which he uses to invest both in UBS funds and in individual stocks. His finances are sound enough to withstand any interest rate fluctuations.
A market-oriented mortgage profile is therefore the most suitable option for Oskar Kaufmann.
Mortgage mix for Oskar Kaufmann
Mr. Kaufmann would like to take advantage of the favorable interest rates currently available on the money markets. He projects a moderate rise in interest rates over the next few years.
In order to spread his risk, Mr. Kaufmann is aiming for a mortgage mix consisting of a 3-month UBS Libor Mortgage and a 10-year UBS Fixed-Rate Mortgage. This will allow him to benefit from the attractive interest rates offered by a Libor Mortgage, whilst also securing the low current interest rate for a period of ten years with his Fixed-Rate Mortgage.
If, contrary to his projections, the short-term money market rates should rise sharply, he could:
- still absorb a higher interest rate on his UBS Libor Mortgage given the sound affordability of 20%
- convert his mortgage to a long-term fixed-rate UBS mortgage at the end of any fixed-interest period
- use funds from his pillar 3 scheme or from his savings to amortize a substantial share of his UBS Libor Mortgage upon expiry of the three-year term of the contract
Following an advisory consultation with his UBS client advisor, Oskar Kaufmann opts for the following solution:
The mix which Oskar Kaufmann has chosen will allow him to enjoy the benefits offered by both of the mortgages. He will benefit from the attractive interest rates offered by a Libor Mortgage, whilst also securing the low current interest rate for a period of ten years with his Fixed-Rate Mortgage.