Foreign Currency Mortgages - the pros and cons. Page 2

Author: Anna Richardson

However, if Sterling falls against the Euro,

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then you will be out of pocket, having to repay effectively more than you initially borrowed. It's a huge gamble, and your home will rest on it. Your home will be at the mercy of the exchange rates, so you could win, or lose, a significant ( remortgages ) amount of money.

To get a foreign currency mortgage you will need a deposit of at least 20% for your house ( home insurance ) purchase, so you will need to have a good cashflow to arrange it.

There is an alternative to the above, one that represents less risk. You can link your UK mortgage to an interest rate in a different country. This means that you are not gambling on the exchange rate, but you will still be subject to the interest rate, in the hope that they will not at any point ( personal loans ) exceed the UK interest rate. There is less risk involved, however these kinds of mortgages do tie you in for a longer period, ie 5 years, and the redemption penalties will be more than nominal. There is a certain degree of flexibility though, and you can often transfer the mortgage to another property if you want to pay the loan off early.

The above option is particularly popular with mortgages linked to the Swiss Franc interest rate, because their interest rates have stayed at beneath 1% for the last four years. The Eurozone interest rate is also very stable, and has not moved in five years.

Whatever your decision, and even with a UK mortgage, it's a gamble ( cheap loans ) and deserves a lot of thought. It's probably worth talking to a financial specialist about it. There's big savings to be made, but have you got the stomach for it?