Foreign Currency F.A.Q

'Which alternative currencies are available?'

You can choose to avail foreign currency mortgages in Swiss Franc, Euro, Japanese Yen, United States Dollar, Canadian Dollar and the Australian Dollar. You can always choose to switch your foreign currency mortgage back to sterling.

'I don't have any experience of the foreign exchange market. Can I take advantage of the lower rates and debt reduction programmes available?'

If you are unsure about your ability to manage the mortgage you can engage the services of professionals who can. One management company reduced a £1,000,000 sterling loan advanced in 1988 to a nil balance by 2003; they have continued to manage the facility into a credit balance worth £206,884 in December 2006. This has been realized without paying a penny more than a conventional sterling interest-only mortgage. The debt reduction has been possible simply by switching the mortgage into and out of the alternative currencies stated above.

'I have some experience of the market. Can I 'manage' the loan myself?'

Yes. A number of people prefer to take advantage of lower interest rates associated with a currency that is regarded as relatively stable against sterling. They monitor the exchange rate movement of their chosen currency against sterling and switch to an alternative if it is strengthening or is likely to strengthen against sterling. If you have the time, experience and good judgement you can authorise the banks to make the switches yourself. Of course, it is always possible to change back to sterling.

'How is the interest rate structured?'

The interest rate is linked directly to the currency's equivalent of the London Interbank Offered Rate (LIBOR). The lenders will charge a fee to cover costs and make a profit. The margin is negotiable and dependent on many factors, including the loan amount, risk profile of the applicants and the loan to value (LTV) ratio. The margin is generally between 1% and 1.75%. A competent broker should be able to negotiate favourable margins and costs for you.

'What types of mortgage products are available?'

A foreign currency mortgage tends to be regarded as a variable rate mortgage because it tracks the currency's equivalent of the London Interbank Offered Rates (LIBOR). However, it is possible to fix the interest rate for up to one year. Most lenders allow capital repayments without charging an Early Repayment Charge.

'How long does it take to arrange?'

Usually, it does not take longer than a traditional sterling mortgage. Of course, you will need to obtain certain documents to support your application and be reliant on third parties involved in the transaction to move swiftly too. Generally, a straightforward refinance/re-mortgage takes approximately 30 days.

'Can I switch the loan into and out of alternative currencies after the loan has been drawn down?'

Yes. The majority of the mortgages we arrange are regarded as multi-currency mortgages. You can switch the mortgage into and out of one of the following currencies: Euro, Swiss Franc, Japanese Yen, United States Dollar, Canadian Dollar and Australian Dollar. Alternatively, if you have engaged the services of a professional currency manager, a specialist will manage this for you.

'Can I offer a number of properties as security for one loan?'

Yes. It is easier and cost effective for you to have one mortgage with one mortgagee secured against a portfolio than it is to have several individual mortgages with different providers. Of course, managing one loan is also easier than managing several.

'Can I reduce my balance by making ad hoc lump sum payments to the mortgage account'

Yes. All lenders will permit you to reduce the outstanding Repayment balance Charge. without incurring an However, conditions Early may apply.

'Will I incur an Early Repayment Charge if I redeem the mortgage early'

Generally, mortgages are free of any Early Repayment Charges; however, we recommend that you always check beforehand.

'Can the mortgage be held in more than one currency concurrently?'

Yes. If the mortgage is professionally managed then some lenders allow the currency specialists to denominate the mortgage in more than one currency at the same time. If you would like to manage the risk yourself, this option is also available to you but from a limited number of lenders.

'What repayment methods tend to be available?'

Most, but not all, lenders make the facility available on an Interest Only basis.

'What mortgage terms are available?'

Some lenders offer the facility to you for a 5 or 7 year term with an option to 'rollover' provided you have suitable repayment plans in place and you can establish that you meet their minimum lending criteria.

'What is the frequency of mortgage payments?'

The frequency of payments varies with each lender but most will accommodate quarterly payments in arrears.

'What are the initial costs?'

Unlike the lenders in the UK market, the initial costs for refinancing are not incorporated into the interest rate and margins. All clients will need to budget for costs connected with property valuation, conveyance and the lender's arrangement fee. Costs are relative to the property value and mortgage amount so please contact us for further information.

'Can I add any related costs to the loan?'

If the debt/value ratio is low enough, it may be possible for you to combine the fees with the loan but you will need to pay interest on these costs for the duration of the mortgage term.

'Is the mortgage portable?'

No. If you move houses, you will need to negotiate new terms with the lender. We will be happy to assist you with this process.

'Will lenders consider Buy-to-Let investment and commercial property as security?'

Yes. Provided the investment is strong enough and the property is suitable, security lenders will consider investment property.

'What are the ongoing costs?'

If you choose to manage' the risk yourself, some lenders will charge an administrative fee each time you switch to an alternative currency. The cost associated with switching currencies is typically £150. If the mortgage is professionally managed, it is likely that you will be charged an annual management fee. The currency specialists may also take a percentage of any profits they make on your behalf.

'Is the programme tax efficient?'

For UK private individuals borrowing against their main residence, the benefits of foreign mortgages are currently tax efficient. Under current UK tax legislation, the Inland Revenue does not consider reductions in the sterling equivalent of a mortgage (as opposed to gains on assets) to be liable to Capital Gains tax, if such gains are made by individuals in the context of borrowing secured on their main residence.

It is recommended that you should obtain confirmation of your tax position from your tax adviser. Additionally, please keep in mind that tax rules are subject to changes and paying lesser interest on a mortgage is not classed as income for income tax purposes.

'Can I use my own solicitor?'

Yes. However, some lenders would prefer it if you use a firm that has at least four partners to avoid the need to appoint a second firm to look after their own interests.

'What documentation will I need to supply to support my application?'

In all cases, you will need to provide documents to verify your identity and address. The following are likely to be requested by the lender: your last 3 months payslips and your latest P60 (if you are employed) or an accountant's certificate (if you are classed as self employed), your last three months personal bank statements and last mortgage statement.