I am currently resident in England but should like to buy property in Canada. Is it better to obtain finance from an English or a Canadian institution?
- posted
16 years ago
overseas property mortgage
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- posted
16 years ago
Why? Is this for holidaying, renting out, or retiring to, with you continuing to live and earn an income here, or will you be moving there to work and earn, but are just hoping to buy it in advance?
It's better not to obtain finance. :-)
It's usually better to borrow in the currency of your income.
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- posted
16 years ago
"Ronald Raygun" wrote
"Ronald Raygun" wrote
But what if the loan amount will be a large proportion of property value, but the loan payments will be a small proportion of income?
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- posted
16 years ago
There is a risk that exchange rates may move against the borrower, making repayments more expensive. There is also a risk that the interest rate may increase faster than the borrower's salary.
Just because the payments form a small proportion of the borrower's income doesn't mean the rest of his income isn't already committed to other things. But if that's not the case, and the borrower has enough uncommitted income not to be embarrassed should payments rise substantially, then he may well be happy to take the risk, bearing in mind that there is reverse risk too - the payments could get lower if rates go the other way.
What difference does it make what proportion the loan is of value?
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- posted
16 years ago
"Ronald Raygun" wrote
True; perhaps I should have said "disposable income". ;-)
"Ronald Raygun" wrote
If the loan is in Sterling, but the property in Canada, and say (initially) the loan is close to 100% of property value, then adverse currency fluctuations can cause the LTV to rise over 100% -- even if the property value (in Canadian dollars) doesn't fall. The higher LTV may not be desirable...