Spanish Currency Mortgages in Spain and Tenerife

As Tenerife is part of Spain, property in Tenerife is priced in Euros. Something that continually crops up is the subject of  Spanish Currency Mortgages and Multi-Currency mortgages in Spain. This is a complex subject and there is a lot of mis-information surrounding the topic.

To clear things things up, advice from our Tenerife Mortgages website:

Currency mortgages do exist in Spain, in fact every non-resident British buyer has, by definition a currency mortgage. This is because their mortgage is in Euros and the money they earn in the UK is in Sterling. Unfortunately this brings about a risk to these buyers. If the pound goes down in value against the Euro, then their mortgage payments effectively increase.

  • A British buyer paying 1,000€ per month in Spain has to come up with £714.28 when the exchange rate is 1.40€ per pound.
  • If the rate changes from 1.40€ per pound to 1.10€ per pound then they now need £909.10 per month to pay the same mortgage on the same property.

This obviously presents a problem. To offset this risk, currency mortgages were introduced by a select number of banks. You can now take a Spanish Mortgage denominated in £ GBP or Swiss Francs (CHF) as well as many other currencies.

Unfortunately this has led to a lot of bad information about currency mortgages where people for some reason believe that switching to Swiss Francs or some other exotic sounding currency somehow saves you money. It doesn’t!

We also continuously hear about switching to “more stable” currencies. But how can this help you? If your earnings are in £GBP then whatever currency your mortgage is in, presents a risk if £GBP loses value against it – like it has against the Euro.

Most of the advice and information banded about is merely sales talk and is actually quite mis-leading, in some cases plain wrong. Thankfully the banks have addressed this and today it is very unlikely you would qualify for a Swiss Franc mortgage on a Spanish property unless you could convince the bank you have a vested interest in the Swiss Franc currency – perhaps you are paid in Swiss Francs for example – in which case it is a good reason to consider this as a mortgage option.

If you are an experienced investor/currency trader and you understand the risks associated with currency mortgages then perhaps a Spanish Currency switching mortgage is a product that would be suitable for you. These work on the basis that you can switch the currency of your entire mortgage a limited amount of times per year to take advantage of swings in the currency market. These are high risk products and in general are not appropriate for the average property purchaser in Spain.

What is more appropriate, especially for British buyers is the ability to take a mortgage in your own countries currency thereby guaranteeing your payments cannot increase due to a drop in the exchange rate.

It is also possible to Re-mortgage your current Spanish mortgage into £ Sterling for example if you are based in the UK but, take professional advice from an independent UK-qualified mortgage broker.”

If you wish to discuss any aspect of Spanish Currency Mortgages in Spain or Tenerife, contact TenerifeMortgageBroker.com

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