Foreign currency loans and loan at – Opportunities and Risks

Nowadays, real estate financiers not only have the opportunity to finance their valuable assets through a real estate loan from a German bank. Loans from abroad are also increasingly offering attractive terms that should be planned as an alternative. These are loans that are granted in the currency of the respective country. Foreign currency loans always represent final loans in their form, ie the loan amount is paid out first in the foreign currency, then this amount must be exchanged for the local currency again. If the loan is then due again, the reverse is true: your own currency must now be exchanged back into the foreign currency. The main advantage is the much cheaper interest rates that a borrower has to pay abroad.

Foreign currency loans are therefore particularly suitable in high-interest periods when the general interest rate abroad is lower than is the case in Germany. Another advantage is the possibility of an additional currency gain, but this can quickly develop into a disadvantage again – namely if the loan has to be repaid at the end of the term and then has to be exchanged from the local currency to the foreign currency of the lending country , The borrower can almost always assume that the exchange rate of the two currencies will change in relation to each other within the payout and repayment period. Depending on the current exchange rate, this can either result in a currency gain or a currency loss. Example:

The mortgage lender would have to exchange 128,571 USD here so that the lender can get back his loan amount of 180,000 Swiss francs. He would have to accept a currency loss of a whopping 8,571 USD.

Compare offers for foreign currency loans

No matter which financing measure is carried out by the client, the offers available on the market should always be compared. This applies to home purchases as well as to conversions, additions or renovations – and even more so to foreign currency loans. Because even minimal differences in the interest rate will affect not only the amount of interest, but also in credit rate tremendously, since mortgage loans are always concluded for a long term. Most credit institutions that offer mortgage lending therefore also have a comparison calculator. Individual offers should only be obtained after this comparison. If you rely on tailor-made construction finance, you have to take a position with your bank regarding your personal living conditions, the living situation and the known key data of the upcoming construction finance. Offers from foreign banks should not be spared.

Anyone who relies on foreign currency financing from foreign banks should in particular question any currency risks. The offers of foreign lenders can of course be compared with those of German banks. Anyone who relies on global information for their financing will always drive cheaper than people who contact the nearest bank immediately. In addition to the respective providers, all types of credit in question should also be checked and compared. The calculation of the total financing also includes the respective components, such as the monthly comparison of fixed income and expenses and the amount of the monthly loan installment. The mortgage calculators offered on the Internet are helpful for these cases – a helpful tool that, in addition to comparing conditions, also uses the calculation of the various components for the respective real estate loan.

In addition to the interest rate, the interested party can also have the loan amount, the amount of the initial repayment or the monthly loan installment calculated. The respective result depends on the specifications. The most important main component in any real estate financing is the calculation in the interest and repayment plan. What is particularly important here is the distance at which the repayment already made is offset against the remaining debt. As a rule, settlement takes place on a quarterly basis, thus reducing the interest amount.

Regarding the interest rate comparison it should be noted that the builder has to make a decision about whether they want to agree on a variable or a fixed interest rate over a specific period. Only then should the interest rates of the different banks be compared. The following applies: the longer the commitment, the higher the interest rate. however, who puts on advice of little value, should definitely look at direct banks, because here very favorable conditions are always provided. In addition, the offers between the direct banks can be compared very well. This not only eliminates the customer focus, but also the scope for negotiation that you normally enjoy as a long-standing customer at a house bank.

Advantages and disadvantages of online mortgage lending

A mortgage can of course be completed online. The main advantage lies in the mostly better conditions. The same applies, of course, to fees that are significantly higher within a bank’s office due to personnel costs. Another advantage is the quick and comparatively simple processing. With the standard procedures used by the direct banks, a financing processing is guaranteed, starting from the application up to the loan payment. The disadvantage is the lack of advice. The real estate financier should be very familiar with what he wants here. Because even online financing cannot be canceled overnight.

Those who place so care to have to discuss certain aspects with the bank manager, the fingers from online transactions should be. Questions in the online area can only be answered by email or over the phone. However, these means of communication do not replace the on-site consultation.

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