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Multi-Currency Mortgages
Finding the Money

Multi Currency MortgagesMulti-Currency Mortgages (MCM) can be used in two ways to help you acquire your dream property.
•The most widely known use is buying a property in a foreign country.
•It is also possible to use a foreign currency mortgage on a property in the UK.

A foreign currency mortgage is when a bank loans you the money for a mortgage in an alternative currency, instead of British Pounds Sterling. Most banks will favour mainstream currency such as US or Australian Dollars, Euros or Japanese Yen.

The value of this mortgage debt is then converted to British Pounds Sterling on the foreign exchange, often through the same financial institution that you borrowed the money from and you can then use your home currency to buy your property.

The debt of your mortgage then remains in the foreign currency that you chose* and interest is charged in that currency, often in the prevailing rate of interest for that country as opposed to the one denominated by The Bank of England. Your debt is paid off through monthly repayments in British Pounds Sterling, which is then sold on the foreign exchange.

*you are able to change the currency of your mortgage if you have a multi currency switching facility clause but there are variable fees involved with this process and we would generally advise you to go through a financial advisor. Further information on this option below.

We would advise you to research any currencies you are thinking of using to take out a foreign currency mortgage very thoroughly, or to seek advice from a financial advisor. You need to be sure that your currency won't climb against the Sterling and thereby increase your debt. 

For example:
If you take out a foreign currency mortgage in Euros and then that currency begins to fall against the sterling, this means that the amount of the debt in British Pounds Sterling is lessening as the Sterling is able to buy more Euros and vice versa if the Euro begins to strengthen against the Sterling.
If you cannot find the currency you want in the UK, you may be able to find it abroad, but restrictions are generally more stringent and you would be well advised to seek legal advice if you are not fluent in the foreign language, especially for the small print in the contracts.

Home Loans in CyprusTaking out a foreign currency mortgage does not mean that the mortgage has to be in a single currency denomination, indeed, depending on your lender, you may be able to choose a selection of different currencies.

Unless you watch the foreign exchange regularly, this can be quite a turbulent and risky option as your mortgage is determined on the exchange rate. It is unlikely that all the currencies you have chosen will move together against the pound, whether that is strengthening or weakening.

Another option within a multi currency mortgage is a multi currency switching facility, which allows you to switch between the currency the loan is held and hence the interest rate which is charged. This may be more effective in reducing your risk elements and increasing your monetary gain if used to good effect.

If you do take an active interest in the foreign exchange and understand its workings, then this option may be an inviting opportunity to you, as it can be utilized to keep your loan within the most gainful currency, depending on interest rates and the direction exchange rates are moving in.

However, if you are not in this situation, it would be advisable to go through a financial advisor or broker who will be able to judge the foreign exchange for you, as the process can be risky and time consuming, but beware of their commissions eating into your possible profits and the fact that they may not always be successful.

For example (continued from above):
If you take out a foreign currency mortgage in Euros and then that currency begins to fall against the sterling, this means that the amount of the debt in British Pounds Sterling is lessening as the Sterling is able to buy more Euros and vice versa if the Euro begins to strengthen against the Sterling. Concurrently, the Japanese Yen is falling against both the Euro and the Sterling.

Normally this would have no effect on your loan, but if you have the ability to switch currencies, not every loan does so check before you agree terms, you would be able to switch your mortgage into the weakening Japanese Yen and thereby reduce the debt of your loan and putting yourself in a potentially more profitable situation.



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