Mortgage In Europe

Getting a house loan in Italy can offset the High Euro:

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The main advantage of getting a mortgage in Italy instead of the United States could offset the strong European currency. Right now the rates in Italy are generally a little Higher than rates in the US but the difference is not so much and If the currency markets work in your favor, then there are savings that arise from a favorable fluctuation in the exchange rate. If the dollar rises in value against the Euro, then you will need to spend fewer dollars to buy the same amount of Euro you initially borrowed. This means that in real terms, your mortgage has actually decreased and your monthly repayments will be lower in dollars. Alternatively, if there is provision to do so in the terms of the mortgage, then it would be possible to maintain the level of the repayments and clear the debt early with a lower total interest bill. Given the fluctuation of the foreign exchange markets, these variations can be quite sizeable. At one point in 2000, the Euro quoted .83 had declined 15% percent against the US dollar but right now the Euro is 25% stronger at approximately 1.26.

Of course the opposite can be said : your house loan in Italy will cost you more if the dollar will keep loosing ground versus the Euro. Given the relative strength of Euro at the moment, it would seem that this risk is fairly small. In any case, the more that you borrow, the greater your exposure to the risk and the more you could end up having to pay if the currency swings go against your favor.

Most Italian / European lenders will advance you a maximum of 75 percent of the property value for a foreign currency mortgage. This 75% does not seem very high as a percentage to the 'American eye' but is very high for Italy - I remember that only a decade or two ago bank will only loan an affective 50% of the value of the property. Right now if you are considering investing in real estate in Italy could be a good time to have a loan in Euros.