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Good day,
I have a LIBOR mortgage with a 3-year term. I do not have to amortize the mortgage. In the "amortization" field in the contract it says "none". Can I still amortize the mortgage anyway? If so, how much of it can I pay off?
Thank you for your competent answers.
With kind regards
Hi there,
There are no across-the-board rules regulating the amortisation of LIBOR-based mortgages. In this way mortgages differ from personal loans, which can be amortized at any time without penalty in keeping with the Swiss consumer credit law. The terms and conditions of each LIBOR-based mortgage are laid out in individual contracts, so the term of your contract determine whether or not amortisation is possible.
Many Swiss lenders allow you to either amortize your LIBOR-based mortgage or to switch to a different mortgage every time a tranche of the mortgage expires. In the case of LIBOR-based mortgages, a tranche is the term over which the LIBOR-based interest rate remains the same. If the mortgage uses a 1-month LIBOR, 3-month LIBOR, 6-month LIBOR or 12-month LIBOR, then you would have the opportunity to amortize and/or switch to a new mortgage contract every 1, 3, 6, or 12 months.
Because amortisation and refinancing options vary between mortgage providers and contracts - particularly in the case of LIBOR-based mortgages - a good first step would be to contact the bank or other lender which holds the mortgage and ask them whether your contract gives you the option of amortisation and if not, whether you can amortize or change to an amortizing mortgage at the end of each LIBOR tranche.
Best regards from Moneyguru
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