foreign mortgage

ecstatic said:

Emerging market currencies tend to appreciate in real terms.

This means the Zloty will appreciate over next 20 years.

Click to expand...

That really only holds true if their economy grows, you have listed examples of emerging economies in Europe which in the past have appreciated but

a) Past performance is not guarantee of future ones
b) There are also many examples of emerging markets e.g. in South America whose currencies have gone down the toilet.

I might be willing to take a punt that the Polish economy has good growth potential but there is a risk that it wont

ecstatic said:

As an aside, I do not know of any financial institutions or corporations who would enter into a long-term obligation in one currency (i.e. a mortgage) with their asset (property) in another and not look to hedge their exposure.

In eastern europe most of the banks do allow CHF EUR & local currency.

Take a look at this document:
[broken link removed]

Most agree hungary is way overvalued currency.

Im quite bullish on the Zloty been undervalued whether you wish to risk 100K or whatever the price of the apartment is on anyones bullishness remains to be seen.

Click to expand...

But all those banks will have hedged their currency exposure. Unlike most likely the individual investor. As an aside, I was reading recently that the regulators in Poland are planning on placing restrictions on foreign currency lending by domestic banks due to the risks that it brings to the stability of the banking system over there. May be worth checking to see to see exactly what this entails.

Lots of them in south america have gone down the toilet but one or two are doing okay, rio is i would consider expensive.

Argentina defaulted so that doesnt really help.

"Past performance is not guarantee of future ones" absolutly i think we have all found that out from our local pension companies.

"I might be willing to take a punt that the Polish economy has good growth potential but there is a risk that it wont" - Yes very true but if u have decided its the place ur gonna buy property in then obviously you have made your investment decision. Not sticking fully by it in terms of currency i would deem a weakness in investor sentiment as if it goes down the pan then u can sure as heck bet your property will be doing likewise.

Hi, I have just registered and want to thank everyone for this lively debate - great information.

I am buying a property in Poland also and bank has advised me to go with CHF and I am paid in GBP. They charge 1.5% for the privilege though. What I am wondering is will I be charged this to change PLN (rent) into CHF 1.5% aswell..

Maybe this is why the banks are keen to offer it..they make 1.5 both ways??

Any ideas?

Lot of currency risk and costs there-you will be charged each time you exchange currencies, unless the bank have indicated otherwise.

Why are they pushing a CHF mortgage for a PLN investment?

Tone66/CCOVICH, you have hit the nail on the head. The fees, margins, spreads (call them what you want) that banks take out of any cross currency movements are quite lucrative.
I have worked with these products for many years and believe me they are marketing them because they are profitable.

In my humble opinion, if you are taking out a mortgage abroad, borrow in the local currency. Keep it simple.

If you still want to have a shot at taking Currency risk, then buy a put or call from your broker. But do it separately to your mortgage.

cheers and good luck

CCOVICH, they have advised me to do this as it is the least interest rate, they have not gone into the risks of currency, I assume because in one hand it is the lowest interest rate and the other they make money on conversion.

SpatenMan,

Thanks for the advice I think you are right to borrow in local currency tempting as it is to go for the low rate ultimate risk.

It's a tricky one...I usually do take risks, but have been burn't before

Cheers..

Any differential in interest rates is likely to be wiped on on FX.