Mortgage interest rates in this country vary widely, as they do abroad. Make sure you find the best interest rate when you decide to take out a foreign currency mortgage to allow you to maximise the potential of the situation. As in the UK, the mortgage market is fairly competitive in most countries, especially within Europe.

Foreign currency mortgages could help your mortgage to decrease substancially, bringing with it lower monthly repayments and offering you the opportunity to pay off your mortgage more quickly and thereby reduce your total interest amount.

As your mortgage rests on foreign exchange rates and fluctuates accordingly, sometimes sizeably, keeping an eye on what the exchange rates are against the pound sterling, apart from being a necessary part of having a foreign currency mortgage, could help you ride possible windfalls.

If the pound sterling rises in value against your mortgage currency, you will be able to buy more of the foreign currency with the same amount of pound sterling. This means your monthly repayments will be less and the overall value of your mortgage has decreased.

This offers further advantages to the opportunists. If the above situation ocours and your monthly repayments decrease, you can further maximise the situation by keeping your repayments at the same amount and paying off the mortgage sooner, saving on the total interest bill and being out of debt earlier than expected.

Other situations include people working for international companies, where they are paid in a foreign currency. If the interest rates are in your favour, you may be able to convert your foreign currency to pounds sterling and make a substancial profit and then take out a foreign currency mortgage.

Another option is to take out a mortgage in the foreign currency you're paid in, especially convenient if you own a bank account in that currency, allowing you to bypass exchange rates and bank charges.

However, the advantages of having a foreign currency mortgage do not apply in this situation and you are effectively having a mortgage in your home currency, such as taking out a mortgage in pounds sterling, but then you avoid possible risks associated with such loans.

A further advantage to a foreign currency mortgage, although not to everyone's taste, is the option in some countries to take out a loan on a longer basis than allowed in the UK. This offers a fixed long term loan for as far into the future as you can plan.

The advantages of a foreign currency mortgage may be abundant but the risks are equally so. As the exchange market increases, it may also go against you and weaken your home currency, increasing your repayments and maybe keeping you in debt for longer.

This is sometimes where you should think about utilising your multi currency facility and switch to a more profitable exchange rate if possible. Click here for further information.

If you do not have this option or chose not to capitalise on it, you are then at the mercy of the exchange market and they won't listen to your individual complaints!

If things deteriorate and the pound sterling falls against the foreign currency of your loan, you may find your monthly repayments spiralling upwards as the value of your loan increases.

For example:

If you take out a loan in Japanese Yen, which then rises against the Pound Sterling by 7%, the value of your loan would increase by 7% and hence your repayments would increase accordingly.

The risks do depend to a certain extent on the amount you have borrowed, as the amount you may end up repaying will increase proportionally, but you may also find that the pound strengthens again and inproves your prospects.

Foreign currencies do depend on you being able to find a bank or organisation that will offer them. Many banks will not offer the facility as they are aware that many people are not aware of how market fluctuations may not go in your favour and hence in the worst situations, you may lose your house. Most banks will not want to go through the intense legal process of repossessing a property or recovering their funds in a foreign country and are hence put off from offering this service.

The largest and most realistic risk is the possibility that the pound might fall in value against the foreign currency of your mortgage and you may end up repaying more than expected.

When you take out a foreign currency mortgage, you must be prepared for this eventuality and be able to withstand possible large losses. We would recommend that you seek professional advice before you decide to proceed.

Our impartial advice team is on the phone and available to you from 8am to 10pm, Monday to Friday. Give them a call to help you decide and they may be able to offer you some more suitable options and explain any queries you may have; 08704 28 28 29