Real estate loans are now available at a very low interest rate, but some consumers are still looking for a way to save money on property financing in addition to the low interest rates. The choice is more and more often on a foreign currency loan. But is the foreign currency loan currently useful as a real estate loan?
Real estate loan of the Lite Lender
When it comes to foreign currency loans, there are basically two aspects that can make such loans a sensible alternative to the real estate loan of the Lite Lender. The first aspect is the interest rate, which can be lower in other countries than in Germany. At present, however, there is hardly a country that can have as low a mortgage rate as is the case in Germany.
So while the potential interest rate advantage is always dependent on the current interest rate situation, there is another potential advantage with a foreign currency loan that can always be used. However, this advantage does not always have to occur in practice. In addition, due to a certain development, the advantage can quickly become a financial disadvantage.
Currency gain as a possible benefit of the foreign currency loan
Since the foreign currency loans are not paid in USD, but in a foreign currency, such as in US dollars, currency gains can occur. Because the loan must also be repaid in the foreign currency, which of course must first be “exchanged” for the USD. Should the exchange rate of this currency against the USD develop favorably between the conclusion of the loan and the planned repayment , the borrower will later have to spend less USD to repay the loan than he previously received.
In this case, the customer could post a currency gain. However, if the price develops unfavorably from the customer’s perspective, currency losses can also be caused. In this case, the borrower would then have to spend more USD to repay the loan than he previously received as a loan. Foreign currency loans are almost always final loans.