Own a 2nd home or planning to buy one??

[OFS Spain]

Allow me to introduce myself, my name is Alan Macdonald and i work with OFS Spain in the Costa Blanca.

We have recently added a new mortgage product to our vast list of services.

If you are planning to purchase or own residential property in Great Britain, Spain, New Zealand and selected locations in Australia, Canada or the USA this mortgage is ideal.

Its aimed primarily at 2nd home owners and property portfolio owners.

We can secure rates as low as 1.6% and 3.5% by utilising foreign currencies.

You may have heard of multi currency mortgages before but if not i will explain further.

A currency mortgage is when a bank lends you money for a mortgage in an alternative currency other than British Pounds. Most banks will favour mainstream currency such as US Dollar, Australian Dollars, Swiss Francs, Euros or Japanese Yen.

The reason for doing this is the interest rates, the UK has a higher rate than alot of other countries, look at the list below to compare.

Current UK Libor interest rates are 5.95% (as at 27/04/07)
Current Euro Libor interest rates are 4.28% (as at 27/04/07)
Current Yen Libor interest rates are 0.82% (as at 27/04/07)
Current Swiss Franc Libor interest rates are 2.63% (as at 27/04/07)

The ratio of loan to value is 75%

The loan is provided on a Status basis and we can take, rental income, pension and investment income along with normal salary income into account.

Think of the interest savings alone.

FX Risk

Borrowing in low interest currenceies has an immediate benefit of paying less interest but there is an inherent foreign exchange risk attached to borrowing in another currency.

If the currency you are borrowing rises against sterling, the size of your debt will increase proportionately.

Worst Case Scenario, you should be capable of accepting a 15% increase in the size of your debt but bear in mind the "savings of interest" over the term should outweight any potential loan increase.

We outsource our currency risk management to a London based organisation called the ECU Group.

ECUs experienced currency management team manage the currency of your debt on a discretionary basis with a view to limiting currency losses and maximising currency gains.

Your lending bank will set a level at which they have the right to convert your managed mortgage back into sterling to prevent further currency losses. This level is called the "conversion limit and is typically set at 15% above your agreed loan.

You may withdraw from the programme and convert your loan back into sterling at any time in order to ensure that you are no longer exposed to debt increases through adverse foreign exchange movements.

With the savings in interest we would suggest puting together a savings plan to maximise growth further.

Example

This example will show you how a Managed Multi Currency Mortgage works and how over a period of time your loan could actually reduce.

Key
JPY = Japanese Yen CHF = Swiss Franc

6th Jan 2006 Client draws down ?150,000 mortgage and converts to JPY at 201.6.
They now have a JPY mortgage of 30,240,000JPY being charged at 1.63% (rate at 06/01/06).
First 1/4 payment made on 6th April, payment is ?611.25 at 06/04/06 exchange rate.
Amount would have been ?2381.25 if loan value was kept in pounds.
Quarterly saving of ?1770.
Second 1/4 payment made 6th July, saving another ?1770.
Third 1/4 payment made 6th October saving another ?1770.
6th October we take advantage of the weakening Yen at 222 and switch it across to Swiss Francs (CHF).
New Borrowing after switch equates to ?136,216.00 at 06/10/06 exchange rates.

Interest only savings over 9 months equate to ?5310.

Capital Reduction equates to ?13,784 or 9.1%.

Total saving over 9 months is ?19,094 or 12.7%.

As confirmed above this saving per annum could be invested to provide further capital growth.

Ive given you a lot of information to digest.

If this product is of any interest to you please do not hesitate to contact me.

We are puting a website together to showcase this product and this should be online within the next couple of weeks. Meanwhile you can email me at alan_ofsspain@yahoo.com.

Thank you for taking the time to read my posting.

Alan Macdonald
OFS Spain