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Using a mortgage to hedge the strong euro

With the continued strong euro and weak dollar (1.49 USD for 1 euro at the time of writing), we are seeing many smart US customers thinking twice about buying property in cash, and taking an immediate hit on the exchange rate.  Several customers have contacted us asking how a French mortgage can help people with their income and savings in US dollars.  There are several options available :

First, know that (subject to your personal situation), obtaining a euro mortgage with a French bank for your French property purchase is possible.  Taking an example of a 400 000€ property purchase, you could borrow 320 000€ instead of paying cash.  With a flexible mortgage product that allows you to repay the loan early without penalties, you can then choose your moment to move your US dollars into euros when the exchange rate is more favorable.  Of course, there are fees and interest charges to consider in such an operation but depending on where you feel the US dollar / euro exchange rate will go over the next couple of years you could save significantly.

For customers buying larger properties, we can also provide a solution to lend up to 100% of the property price.  This is possible if you are willing to place an investment under management with the bank, or one of their chosen partners.  This money can also be held in US dollars, so again you do not get hit with an exchange rate.  You can then choose to pay down the mortgage without penalties when you feel it is appropriate.  Taking the 400 000€ property purchase above, this would mean you place 100 000€ (or US dollar equivalent) into a managed fund (which can only contain up to 20% stock market exposure) and this fund is used as additional security for the 100% mortgage.  The capital you may generate on the savings can then be used to pay down the mortgage.

If you are planning to generate rental income from the property, you are then matching your income and your mortgage payments in the same currency and you exchange rate risk is limited to the difference between your mortgage payments and rental income.

When you are transferring money to euros, remember also that using a currency broker can save you significant money when compared to your high street bank.  We would be happy to recommend a trusted currency broker to you.