How a French Euro mortgage can save you money

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 .
The Background
Purchase price E850 000
Mortgage term 20 years
Interest rate 2.45%,fixed
LTV - 59%
Exchange rate at time of purchase : 1.147E / £1.00
Exchange rate at end of mortgage term: 1.255E/ £1.00
Outlay £741,064 E500 650/ expressed in £436,487
Immediate cash investment in £ £304,577 £304,577
Assumptions Common to all Scenarios
Total £ outlay on day of purchase £741,064 ( it excludes purchase costs )
Evolution of property price (annualised) in € 0.00%
UK RPI 0.00%
UK CGT Rate 28%
Number of purchasers (equal & proportionate) 2
UK CGT Allowance (present Value) £22,200
Mortgage payments made monthly in arrears
( 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