Tranche strategy: advantages, risks and optimal approaches

Splitting your mortgage into several tranches is a popular strategy in Switzerland, often recommended by banks. But beware: while it offers real advantages in terms of diversification, it can also create a lock-in trap that limits your freedom. Here is how to use it wisely.

The principle of mortgage tranches

Instead of taking out a single mortgage for your entire borrowing, you divide it into several independent parts, each with its own conditions:

• Different terms: for example, one tranche at 5 years and one at 10 years.
• Different types: for example, one fixed-rate tranche and one SARON tranche.
• Different amounts: the split can be equal or unequal.

Concrete example

On a CHF 800,000 mortgage:

The weighted average rate (1.13%) is lower than a 5-year fixed rate alone (1.35%), thanks to the more advantageous SARON component.

The advantages of tranches

Interest rate risk diversification

By combining different terms and types, you avoid putting all your eggs in one basket. If rates rise, your fixed tranche protects you. If rates stay low, your SARON tranche lets you benefit.

Staggered renewals

With staggered maturity dates, you never have to renew your entire mortgage at once. This reduces the risk of having to renew at a time when rates are particularly unfavourable.

Partial flexibility

A SARON tranche can be terminated with a short notice period (3 to 6 months), offering flexibility that you don't have with a single fixed rate. You can convert that tranche to fixed if rates start to rise.

Cost optimisation

In a low-rate period like the current one (SARON at 0.64-1.20%), including a SARON component reduces the average cost of your mortgage. In the example above, the saving compared to a full 5-year fixed rate is 400,000 x 0.45% = CHF 1,800 per year.

The lock-in trap: the major risk

This is the flip side, and a trap that many Swiss homeowners fall into. Here is how it works:

The mechanism

You have two tranches with the same bank with different maturity dates (for example, Tranche A in 2028 and Tranche B in 2031). When Tranche A reaches maturity, you would like to compare offers and potentially switch banks. But Tranche B still has 3 years to run.

Problem: most competing banks refuse to take on just one tranche -- they want the full mortgage. You are therefore forced to renew Tranche A with your current bank, without being able to put it out to competitive tender.

The cost of lock-in

Without competitive bidding, your bank has no reason to offer you a competitive rate. The observed difference between a negotiated rate and a non-negotiated rate can reach 0.30% to 0.50%. On CHF 400,000 over 5 years, that represents CHF 6,000 to 10,000 in additional cost.

Strategies to avoid lock-in

Strategy 1: align maturity dates

The simplest solution: all your tranches mature on the same date. This way, you can transfer your entire mortgage to a competitor if you wish. Tranches then serve only to diversify types (fixed + SARON) or to achieve a lower average rate.

Strategy 2: SARON + fixed

The SARON tranche can be terminated with 3 to 6 months' notice. Combine it with a fixed tranche, and when the fixed tranche matures, you can transfer both tranches to a competitor (by terminating the SARON within the notice period).

Strategy 3: different banks

If you want different maturity dates, place each tranche with a different bank. This way, when one tranche matures, you can freely put it out to competitive tender without being tied to the other bank. Note: this requires a shared mortgage note (cedule hypothecaire), which is not always straightforward.

Strategy 4: limit the number of tranches

The more tranches you have with different maturity dates, the stronger the lock-in. Two tranches maximum is a reasonable rule of thumb. Beyond that, complexity increases and your freedom diminishes.

Strategy comparison table

Our recommendation

In March 2026, with very low SARON rates and attractive fixed rates for shorter terms, we generally recommend:

• For cautious profiles: a single fixed-rate mortgage for 5-10 years, simple and with no lock-in trap.
• For balanced profiles: a 5-year fixed tranche + a SARON tranche, with aligned maturity dates, to benefit from low rates while maintaining security.
• For dynamic profiles: a single SARON mortgage, to maximise savings in the current low-rate environment.

In all cases, avoid tranches with staggered maturity dates at the same bank, unless you have a good reason and are aware of the lock-in risk.