How a French Euro mortgage can save you money

 

 Advantages  of purchasing with a French mortgage at a time when there is a downturn in the exchange rate of sterling  to Euros .

 

Whilst the exchange rate hasn't dropped to it’s current level since 2009 , (which in itself has a negative effect on the availability of cash to put towards the purchase of the French property), there are still potential advantages to consider by using a Euro mortgage to purchase the property when the Euro exchange rate is low against the pound, if you feel that the exchange rate will recover and increase in the near future.
 
Below is such an example  of a purchase in 1995 which demonstrates an exchange rate gain as a  result of purchasing with a Euro mortgage compared to a  cash purchase or purchase with a Sterling mortgage .

 

CASH PURCHASE/ UK MORTGAGE (£)                           FRENCH MORTGAGE  E        
                              
Outlay                                                             £741,064        E500 650/ expressed in £436,487
Immediate cash investment in £                  £304,577                                                £304,577

Total capital payments over 20 yrs             £741,064                                                 £677,161

GAIN                                                                                                                                 £ 63,903

(Exchange Rate Gain due to French Mortgage Route)                                                                                                                 

 This example was based on the exchange rate , provided by the Bank of England  between 17/11/1995 to 17/11/2015 ( 20 years).
( It included highs of 1.75E/ £ and lows of 1.02E/ £)
 
The use of a Euro mortgage  has the effect of reducing the cash investment expressed in sterling to £667,161 representing a saving of  £63,903 compared to a cash investment of  £741,064  had the purchase being  in cash ( £s)  or  via a sterling mortgage  on the day  when the exchange rate was low ( in this example it was 1.147E/£).
 
Apart from the details provided above there are other considerations to take into account if you anticipate that the exchange  rate will increase in the medium term, higher exchange rates tend to result in  there being more active buyers,  this increase in the demand for properties has  the effect of increasing French and Spanish property prices .

The above example highlights the flip side of taking a Euro mortgage when the Sterling exchange rate  is low against the Euro.

 If you have any further queries please don't hesitate to contact our office - tel 01844 218957 email :enquiries@charleshamer.co.uk