A client has just secured a mortgage direct from a major Spanish Bank which may be of interest to anyone still considering their mortgage options.
The Mortgage is taken in foreign currency of your choice and the interest is based on the interest rate of the currency taken. Unlike previous foreign currency mortgage you can change from one currency to another every 3 months at no penalty, so for example a yen mortgage with interest rate of .762% + a broker fee of .0255 + banks charge 1.1% = 1.887% If the yen interest rate goes up you can switch to Swiss Francs, other currencies or good old euros should you wish.
They offer a period of 2 years interest only, and up to 88% of the combined purchase price and costs if this equals less than 80% of the valuation. All avaialable to non residents
Only possible negative is that you pay quarterly not monthly.
Ability to service the mortgage as a % of disposable income is still calculated on the basis of it being a euro mortgage. A small charge of .3 of 1% to convert your Euros to Yen or your chosen currency
Still looking for a catch but havnt found one yet.
Still looking for a catch but havnt found one yet.
The catch is, that your debt increases in euro’s if the foreign currency increases in value. Can you imagine the fun, if your mortgage goes from 400.000 to 440.000 just because the yen increased ? Switching to a different currency within that mortgage sounds nice but you will only do that because of an increase in value (or interest) and then the damage is already done.
However, it sounds very temping to only pay below 2% 🙂 You can try to cover part of the risk by using long running options on the foreign currency that your mortgage will be in. It does show the current state of the spanish market, the banks are creating new products just so the people will be able to still afford the silly prices.
Same situation in the Netherlands, where you can now get a “generation” mortgage. Your parents start paying for your house and you take over, maybe your kids kids will be able to finally pay the house 😉
The catch is, that your debt increases in euro’s if the foreign currency increases in value. Can you imagine the fun, if your mortgage goes from 400.000 to 440.000 just because the yen increased
Because you have the ability to change currency each quarter at no cost your expose ever is only the current quarter due. for a small fee an insurance is avaialble from the bank to cover this. you can also request to be notified of currency and interest rate fluctuations.
In practise it is for the financially sofisticated
Currently 90% of mortgages being done by this bank are nulti currency so I guess 90% of the people are financially sofisticated 😉
but the minimum amount of mortgage amount have to be in millions including portfolio
This is in fat a SUBPRIME mortgage. Everybody is investing in yens and this will explode someday.
The wiser solution is to wait for the bargains that will be available in the following months. A lot of property developers are going to bankruncy. For example this one: