Beware of mortgage lending with foreign currency loans
May 14, 2019
Because the private mortgage lending business is highly competitive, banks are always coming up with new financing concepts.
The banks aim to offer particularly individual financing solutions and thus to win over customers
Partly, this also applies to relatively unusual financing options in order to be able to create special advantages for the borrower and at the same time to ensure that the comparison with other financing offers is made more difficult.
One of these financing options includes mortgage lending via foreign currency loans
This refers to loans that are taken up and managed in a foreign currency. Particularly widespread are loans denominated in Swiss francs. Corresponding financing is offered not only by Swiss banks, but also by more and more German banks.
According to the banks and loan brokers, foreign currency loans are mainly characterized by a low interest rate. By historical comparison, it is clear that Switzerland has always been able to score with relatively low interest rates – because even small interest rate differentials can ultimately lead to large savings, some financial advisers recommend borrowing.
However, it is often not very clear what the so-called currency risk
Because a foreign currency loan is held in a different currency, changes in the exchange rates can quickly lead to significant additional costs and make financing significantly more expensive. Potential borrowers should therefore calculate well and, if in doubt, refrain from borrowing. The currency risk is just too high and can make the financing much more expensive – so in many cases you should not take that risk.