Foreign currency mortgage

A foreign currency mortgage is a type of mortgage loan that is repayable in a currency other than the currency of the country in which the borrower is a resident. These mortgages are used for both personal and corporate financing.

The interest rate on a foreign currency mortgage is based on the rates applicable to the currency in which the loan is denominated, not the borrower’s domestic currency. Such mortgages may be attractive when interest rates on the foreign currency are significantly lower than those available for loans in the borrower's own currency.

However, foreign currency mortgages expose the borrower to exchange rate fluctuations. If the borrower's domestic currency strengthens relative to the loan currency, the borrower can repay the mortgage at a lower cost, effectively achieving a capital saving. Conversely, if the domestic currency weakens against the foreign currency, the cost of repayment increases, resulting in a capital loss.

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