# Is it possible to take out a Euro mortgage on a UK property?

#### Jonny69

##### Man of Honour
Man of Honour
Question: Is it possible to take out a mortgage from a European bank (e.g. France) in Euro on a UK property? I'm not sure if I'm having maths fail here, but if you take out a Euro debt while the UK currency is weak, when the UK currency becomes stronger the value of the debt in GBP should be smaller?

A very simplistic explanation, discounting any interest rates, charges or payments:

You need £100K for a UK property. You use a French bank and take the mortgage out in Euro. The current exchange rate is €1.1 : 1£. The debt is ~€110K sat in a French bank.

When the exchange rate becomes €1.2 : £1, you still have a €110K debt in a French bank, but it is now worth £92K.

If you get lucky and the exchange rate hits €1.4 : £1, the €110K debt is now worth £79K.

...which is about £30K difference, even if you have to wait 5-10 years. You could then switch the mortgage back to a UK bank and shave £30K off the debt.

Or have I completely missed something here?

#### Dr House

Soldato
Yes but I would take one in CHF if I was you.

A few of my friends took mortgages in GBP to buy a flat in Prague when the rate was 55 CZK to the pound. its now 27.

So to give you a basic example a flat in the centre could have been bought for 4.5 million CZK or around 80k pounds

The same flat is now worth around 11 million a few years later or around 400k pounds.

However it has gone the other way for many people. Quite a few people borrowed money in CHF some years ago to buy property in hungary and cyprus. Now the CHF is a hell of a lot stronger then it was and they are in massive negative equity even though the prices have not come down in cyprus much.

#### [TW]Fox

Man of Honour
What happens when the exchange rate reaches parity again?

#### [TW]Fox

Man of Honour
Yes but I would take one in CHF if I was you.

The same CHF thats just been pegged to the Euro?

#### Vonhelmet

Caporegime
Your maybe sounds correct. How easy it is to do in practice, I don't know.

#### Dr House

Soldato
Also do not forget your repayments will be in Euro, so if the exchange rate goes against you your payments every month will be higher also.

#### Dr House

Soldato
[TW]Fox;20020278 said:
The same CHF thats just been pegged to the Euro?

which why is why it will keep falling (unless it has already?)

#### Ironic Namesake

Soldato
I'm sure this is possible, when my parents bought our house the mortgage was original taken in (DM) Deutsch Marks - don't see why taking it in EUR should be an issue.

Of course a bit of risk involved if the EUR gets stronger ... but if it gets weaker in the coming years then good!

#### Jonny69

##### Man of Honour
Man of Honour
With a mortgage you're looking at a 5-10 year commitment, so it doesn't matter if there are a few blips in the meantime. Like I said, if the rates go back to 1.4 it shaves £30K off the debt. Something would have to go seriously wrong in that time to make up that amount. A stronger Euro or parity for a few years won't do it.

Edit: Fox, you're an accountant or something aren't you? Presumably you've posted that as a loaded question because you already know the answer. I don't. Please expand a bit...

#### [FnG]magnolia

Caporegime
Something would have to go seriously wrong in that time

Things never go wrong with economies and currencies, don't worry!

#### [TW]Fox

Man of Honour
With a mortgage you're looking at a 5-10 year commitment, so it doesn't matter if there are a few blips in the meantime. Like I said, if the rates go back to 1.4 it shaves £30K off the debt. Something would have to go seriously wrong in that time to make up that amount. A stronger Euro or parity for a few years won't do it.

Edit: Fox, you're an accountant or something aren't you? Presumably you've posted that as a loaded question because you already know the answer. I don't. Please expand a bit...

I think the euro sterling rate is as likely to go to 1:1 as it is anything else, which would increase your debt it sterling terms. I can't see 1.4 to the pound in even the near term

#### Blue Cypher

Associate
[FnG]magnolia;20020400 said:
Things never go wrong with economies and currencies, don't worry!

Well i feel assured now

#### Bill101

Soldato
What is the French interest on the loan?, is it more or less than here?. Can you get a fixed French loan or a tracker?
These are some questions to be asked before you take the plunge.
Back in the 80's when UK interest rates were stupid% I was offered Spanish, Portuguese and German mortgages as they were lower interest

#### siandtina

Associate
There has never been parity between EUR and GBP and the CHF isn't pegged to the EUR.

I would advise against as you are taking a gamble that the price of the property will rise and the exchange rates will move in your direction. Eurozone also has higher interest rates so you might end up paying an additional 1% or so per year on the mortgage amount which could negate any movement in the exchange rates anyway. It could be a profitable bet but could also be very unprofitable. In the current environment who knows!

#### jas72

Soldato
If you do manage it let me know...

I can't even get a sniff at a UK bank card because I am not resident in the UK never mind a mortgage or do you mean a french bank in the UK. You'll have 0 credit rating in france so no chance of getting a mortgage there.

Also you'll get hammered on commission for the transfers every month unless you choose to pay it once a year up front..

#### Energizer Bunny

Associate
There has never been parity between EUR and GBP and the CHF isn't pegged to the EUR.

Yes it is. Set at 1.2:1. Announced on Tuesday.

However, other than that, Siandtina is correct. You are taking a big gamble on currency movements and I can't really see why you would want to expose yourself to this kind of risk unless you are extremely confident that rates will move in your favour (and nobody really knows). In fact, if I were the lending bank I would likely insist that you hedged the rate unless you have a very large disposable income compared to the mortgage payments (i.e. you can afford it whatever happens to the rate).

Your big variable for mortgage payments is generally interest rates, why expose yourself to another one? Gambling on currency movements is fine but I would do it with something a little less important than your mortgage.

#### [TW]Fox

Man of Honour
There has never been parity between EUR and GBP and the CHF isn't pegged to the EUR.

To be fair 1.1 pretty much is parity compared to say 2003 but I must admit I thought it had gone even lower than it is now back in 2009.

News certainly seems to regard the action on CHF as a peg.

#### DRZ

Soldato
I have been thinking along these lines for a while but it does seem pretty risky overall...

#### sammo62

Associate
Also you'll get hammered on commission for the transfers every month unless you choose to pay it once a year up front..

That was the major issue I saw with this.

#### Strife212

Soldato
On the other side the Euro could totally collapse ans you could get away with the debt