Independent mortgage advice can help you make sense of the many
different home loans available today. An IFA can guide you through as
to whether an interest only or repayment mortgage is best for you, a
fixed or variable rate, a discounted or current account mortgage. They
can talk to you about mortgage protection and associated mortgage
products required whilst explaining all the other mortgage decisions
that need to be made.
With the number of mortgage choices available - more than 1,000
different deals from more than 100 lenders - an IFA can give you personalized independent mortgage advice for your specific needs. Mortgage IFAs have access to the latest mortgages (including many
that aren't available through high street lenders) and can provide
invaluable mortgage advice, pointing you toward the most appropriate
deals and highlighting any early redemption charges and added charges.
Whether you’re a first time buyer looking for mortgage advice or even a
current home owner looking to remortgage, you can contact us for independent advice on mortgages.
A Yen Currency Mortgage is a foreign currency mortgage where the
borrower takes out a home loan in one currency (Yen) with an option to switch the loan into another
currency.
How does it work?
Rather than your mortgage loan being made e.g. in Pounds (Sterling) the
money is advanced in a ‘mainstream’ currency such as
the Euro, US Dollar or Japanese Yen. The debt value is converted
to pounds sterling and this amount is then used to pay off your
current mortgage or purchase your new property (whichever is applicable).
The mortgage debt remains in the foreign currency (although you
may have the ability to switch between currencies) and the interest
is charged in that currency, generally at the prevailing rate of
interest for that country. The mortgage (debt) payments are made
in the same foreign currency; this is normally achieved by converting
pounds sterling on the foreign exchange (this process is automated).
Potential Advantages Borrowing at a lower rate of interest - By selecting
a country that has a lower rate of interest than the UK.
Huge Monthly Savings – A £150,000 loan
repaid over 25 years at 6.75 percent would give you monthly repayments
of approximately £1,050. If you borrowed the same mortgage
in Japanese Yen, for instance, at a rate of 2 percent, then your
monthly repayments would be around £650. This would be a staggering
monthly saving of £400!
Clear the Debt early – As a result of such
favourable exchange rates if you maintain the payments at the sterling
level (if this is possible with the lender) then the debt would
be cleared earlier with a lower total interest bill. In addition
due to the exchange rate your outstanding debt is actually lower
for example if your debt is in Euro’s and the Euro falls by
5% against the Pound (Sterling) then your mortgage debt is 5% smaller
than on origination.
Continental Mortgage Companies - continental lenders
often lend on much longer fixed terms than UK mortgage companies.
The average length of a fixed period can be anything from five to
fifteen years in France and mortgages can be found with fixed periods
lasting as long as twenty years in Germany. This gives you the security
of having a rigidly fixed long-term budget and knowledge of your
repayment as far into the future as you could realistically need
to.
Potential Risks
The more that you borrow, the greater your exposure to the risk
and the more you could end up having to pay if the currency swings
go against your favor. Given the relative strength of Sterling
at the moment, it would seem that this risk is a fairly real one.
Potential
Windfalls
Given the volatility of the foreign exchange markets, these fluctuations
can be quite sizeable. At one point in 2000, the Euro had declined
almost ten percent against Sterling in less than a year, meaning
tens of thousands of pounds knocked off the total repayment bill
for any lucky British residents who had earlier taken out a Euro
mortgage!
Multi currency mortgages
The most risk reducing and currency exchange effect maximising,
is to use a multi-currency switching facility. This gives you the
opportunity to switch the currency in which the debt is held and
the interest charged. Be warned that broker commissions may eat
into the potential gains to be made, this facility does afford you
the opportunity to keep moving your debt into the most advantageous
currency, depending on the prevailing rates of interest and the
direction in which exchange rates are moving.
Advice
Foreign currency mortgages should be viewed with caution and only
astute investors who are prepared to tolerate the potential for
increases in the size of repayments and debt should consider such
loans. Please contact us if you would like to discuss the pros and cons
of sourcing foreign currency mortgages.