Foreign Currency Mortgages
Property Investors - Reduce your Mortgage Costs by up to 50% and Maximise the return on your Investment Property
Using a foreign currency mortgage you could potentially reduce your mortgage costs by up to 50% a month enabling you to maximise the return on your investment. A foreign currency mortgage enables you to take advantage of lower interest rates available in other countries.
For Example:
A standard buy to let mortgage may have a typical rate of 5.5% at present so a loan of £100,000 would cost £458.34 in interest each month.
A US$ Buy To Let mortgage would have a rate of 2.65%at present so a loan of £100,000 would cost £220.84 in interest each month a saving of £237.50 a month, £2,850 per year.
How Do Foreign Currency Mortgages Work?
A foreign currency mortgage works in the same way as a traditional mortgage but with a few key differences. The mortgage or the re-mortgage is applied for with the lender in £. When the loan is advanced the lender converts the amount owed into the currency of your choice (e.g. US$) a current bank account is opened with the lender in the same currency as the loan, from where payments are collected.
The interest rate tracks the interest rate of the currency plus 1.25% to 1.75%. Currently the US IBOR (Inter Bank Offer Rate) rate is approximately 1.4%, so the mortgage rate is likely to be 2.65% at present. The interest rate is set on the loan is completed and is the reviewed every 90 days.
How much can I borrow?
Dependent on the valuation of your property you can borrow up to 70% of the property value subject to income and rental income. If your looking to borrow more please call us and we’ll search for the best mortgage solution.
What are the benefits?
- You can take advantage of lower interest rates available in other countries.
- The £ value of the loan may decrease if the exchange rate fluctuates. Some lender offer managed mortgages where the switch between currencies to try to reduce the outstanding debt.
For example:
A mortgage is taken of £100,000 at an exchange rate of 1.50US$ to £1, so the loan will be US$ 150,000. If the exchange rate increases to 1.60US$ to £1, then when the loan is converted back the outstanding debt will be £93,750. The loan will have decreased by £6,250. Please Note that a decrease in the exchange rate would the reverse effect and increase the outstanding debt.
What are the risks?
- The interest rates are variable and track the Base rates of the currency the loan is in, so an interest rate rise in the US would effect your mortgage payments, possible out of sink with the UK economy.
- The £ value of the loan may increase if the exchange rate fluctuates.
For example:
A mortgage is taken of £100,000 at an exchange rate of 1.50US$ to £1, so the loan will be US$ 150,000. If the exchange rate decreases to 1.40US$ to £1, then when the loan is converted back the outstanding debt will be £107,142. The loan will have increased by £7,142.
For this reason foreign currency mortgages are not suitable for all borrowers. If you feel this is too big a risk then we may be able to find you a cost effective Buy to Let product.
What does it cost and how do I apply?
To set up a Foreign or Multi-Currency mortgage you will incur the following fees:
- Legal Fees
- Valuation Fee (dependent on the value of your property) £200 - £500
- Lender Administration fee 0.25% of the loan.
- The Mortgage Eye.co.uk Broker Fee
For more information on our services, please contact us at info@themortgageeye.co.uk, or call us on 0845 602 4805.
Your Home May Be Repossessed If You Do Not Keep Up Repayments On Your Mortgage. Change in the exchange rate may increase the sterling equivalent of your debt.