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Multi-currency mortgages are property loans set up across different currencies. Also known as foreign currency mortgages, multi-currency mortgages differ in that they do not have to be set up across two or more currencies with portions of the loan being set apportioned to different denominations. Multi-currency mortgages are not only used when purchasing property across borders, but also used to benefit from foreign exchange and foreign currency interest rates.
Many expats in Asia already routinely operate across different currencies. Accounting for local expenses, salary, home country expenses and property means that banking arrangements may already operate in two or more currencies. Multi-currency mortgages offer the opportunity to make the differences between currency values work in the borrower’s favour.
They are secured against a property, but are denominated not only in the currency of the country where the property is located but also across other currencies. A currency manager will switch between currencies to take advantage of prevailing currency weaknesses and strengths. The main aim is obviously to reduce the capital owed, but it is also possible to benefit from tax advantages and lower interest rates applied to different currencies. The capital debt can be reduced by moving the loan into currencies which fall in value against the property currency. Savings can be made on interest charges by holding the mortgage in currencies with lower interest rates.
Multi-currency mortgages are accepted as being less risky than single foreign currency mortgages; not being tied to one currency means that if the foreign currency shows signs of strengthening against the home currency, the loan can be switched into a different and weaker or weakening currency.
There are risks in multi-currency mortgages that don’t exist with standard loans secured against property, but there are also potentially substantial benefits. If the foreign currency weakens against the home or base currency, the capital value of the loan will reduce whereas if the foreign currency appreciates then the home currency value will go up. Multi-currency mortgages need to be professionally managed in order to take best advantage of changes in exchange rates. It is important to seek good advice and weigh up the risks and advantages for your specific circumstances.
There are minimum requirements for both income and the size of the loan in order to qualify for a multi-currency mortgage. These may differ for asset-rich borrowers so it is important to seek independent, professional financial advice before taking any action. Setting up and managing a multi-currency mortgage will incur fees and charges which must also be taken into account. At Infinity, we are experienced in assisting expats in Asia with setting up mortgages for properties in various countries around the world. Get in touch for a fee free consultation.