Foreign Currency Loans – A Perfectly Normal Financing Option

Thank Finanzierungssuchenden is offered with your mortgage lending or rescheduling of the so-called foreign currency loans as a normal financing option that is just plain cheaper than for example the traditional annuity loans. In so many web pages to read “Mortgages to 1.8%. One could argue that it would be a fool if you did not strike here, but since the rates are much lower than here. But the fact is that the foreign currency loans by no means a perfectly normal and you are not a risk-free or well predictable financing instrument, but only for very experienced in the money market and risk-taking people. And so does the foreign currency loans. The borrower takes on its real estate loans in foreign currency, such as Swiss francs or Japanese yen. This loan will be paid in euros. All interest and amortization to be paid back in each foreign currency, such as monthly or quarterly billed at the current rate and theBorrowers in euros charged to his account. The advantage of initially seems simple: in Japan or Switzerland, the mortgage rates are currently well below the level of Germany. If the value of the euro against the value of foreign currency, must also repay the borrower a lower value in euro for the foreign currency loans. In recent years, customers have been so pleased with gains. What can run so overwhelmingly positive, but can also go in precisely the opposite direction and end in total disaster. To increase the value of the yen between October 1998 to October 2000, at around 80%. That is, in plain language: If you had previously taken a loan of 100.000, – Euro, which was due in October 2000, had 180,000, – Euro repay. Quite so extreme the fluctuations in the Swiss franc does not, but here are fluctuations of normal up to 5% per year. Additional risks: foreign currency loans or variable loans are usually provided with a fixed interest only short, so the interest can always. rise Often or almost always, foreign currency loans are offered in conjunction with the redemption of equity and / or unit-linked life insurance products. Here comes the interest rate and currency risk, or the price risk of the fund added. In most credit agreements are so-called threshold clauses. Increases the price of foreign currency, the financing bank may require additional collateral. Is not it possible to threaten to terminate the loan and at least the transformation into a euro loan to the then current market conditions. CONCLUSION: In a foreign currency loan is basically a bet on at least steady interest rates and exchange rates. Who wants to take that risk in its mortgage lending and has the time and experience to keep a constant eye on its loan, has the chance to actually make handsome profits. But it can also suffer other terrible shipwreck. A further complication is that the credit to the customer requirements are extremely high, so that this variant of funding to the ‘ordinary house builders’anyway usually remains closed. However, there are brokers who offer this option, customers which do not meet these high demands. This is not about teaching the loan, but the fee agreement. Here, the fee is due, even if it has been taught in retrospect not a loan. So be careful with providers who offer this financing option too lightly, and especially to anyone. Finally, it remains to be said. If we switch back the fees as fees in foreign currency, and the switching costs of the loan into the effective interest rate of foreign currency loan, this solution is no longer as favorable as at first thought. This raises the question of whether the risk is still worthwhile. Finally, should anyone in the eye of this variant also taken time to ask the question: Why the interest in these countries are cheaper than ours. Is it, this is perhaps most charitable countriesthat have only just give cheap money