Advise on Swiss Franc mortgages

[Karl Wilkinson]

As a service provider in Romania, on of the most difficult tasks is to find mortgages for Expats. I have recently sourced a company who offer mortgages in SWISS FRANCS. However, I am aware of fluxuations in the exchange rate. Can anyone offer me some advise?

 

[David howe]

As a service provider in Romania, on of the most difficult tasks is to find mortgages for Expats. I have recently sourced a company who offer mortgages in SWISS FRANCS. However, I am aware of fluxuations in the exchange rate. Can anyone offer me some advise?

Borrowing in an additional currency to that which you receive rent in is not advisable for investment. One of the 1st contract cases I learned many years ago (That long ago I cannot remember the name) was about a British Ship bought in the 1920s by way of a loan in Swiss Francs. The stock markets tumble in 29 along with the value of the pound which was a quarter of what it had previously been. The plaintiif sought to pay off the loan for the inital purchase price and the courts said that although the initial purchase price was in Sterling, the debt was repayable in Swiss Francs regardless of the variance.

Therefore, for anyone proceeding with a loan in Swiss Francs, my advice would be do only so if

1. Your rental income is in Swiss Francs.

2. You are aware the Swiss Franc is a very strong currency historically, Sterling is faltering and the euro over valued. If either drop 20% on the Swiss Franc your property is costing you 20% more.

3. You are not faint hearted.


David Howe LLB. LLM.

INVESTMENT ROMANIA - Investment in Romanaia, Property management, Due diligence, Renting in Romania

 

[andyintheworld]

Borrowing in an additional currency to that which you receive rent in is not advisable for investment.

Definitely agree with David about the risks. There is a mortgage broker where I live who constantly harps on about Swiss Franc mortgages and multi-currency advantages, advertising them in the local press so lo and behold every body asks me if they can have one as well...
Unfortunately he does not maker the risks apparent.

The first question I ask a client is "Why do you want that?"

Generally they don't really know or tell me because they read about them somewhere and it said the interest rate was much lower.

I think people incorrectly presume that because the Swiss currency is "stronger" or "more stable" then there is little risk. What they tend to forget is that it doesn't matter how stable the Swiss Currency is if the currency you earn in is NOT Swiss francs.
If Swiss Francs appreciate against Sterling for example - your payments go UP!

A good example of the risks is all those who have purchased with Spanish mortgages - obviously denominated in Euros. As the Euro hasd strengthened against the pound - their mortgage payments in Sterling have increased.
This combined with an increase in the Euribor has a had a hefty impact on mortgage payments.

Most banks wont actually do multi-currency for a general mortgage client as they are too risky but if you are a sophisticated investor who understands the risks or you have a valid requirement for a different currency then they can be arranged through banks and/or private institutions.

I am doing one right now for a client who does have a specific requirement to switch currencies and fully understands the ins and outs of it all.

 

[Magellan]

Personally, I would have viewer qualms dealing between EUR/CHF than with many other currency pairs given the higher interconnection between the two economies. That said, it really isn't advisable.