Mortgage in Euros or Dollars

HI

I am looking for financial advice about possibly buying a property in Canada.

The house would cost approx 110K CDN Dollars (approx 81 K euro at todays exchange rate). I spend approx 3 months a year there.

I live in Ireland for 9 month and am paid in Euros.

If I were to buy said property - which makes better financial sense - a mortgage in Euros OR a mortgage in CDN Dollars given that I am paid in euros?

Best

It is far less risky to borrow an asset in the currency the asset yields.

Taking a canadian mortgage out in euro is like gambling a hundred thousand on the eur/cad fx rate. I doubt you have reason to make such a huge gamble as a side bet.

Who is providing the mortgage? Irish bank or Canadian Bank? I tried to take a small mortgage from BOI once and they said they could not accept the title deeds of a property outside of the Republic as security for a mortgage.

For what its worth I would make a decision on whether or not I thought the euro was currently overvalued or undervalued against CAD and if it were overvalued take the mortgage in Euros then if it that market swung out of your favour in a bad way you at least have the option of living and working in Canada for all of the year and paying at normal rates (assuming it is a normal price vis a vis wages in Canada.

As for the rate, a while ago the Canadian’s were touting their currencies value as a reserve currency. I think if that happened it can imply devaluation (well it does for the USD anyway).

When people gamble on currencies they place stops so that their losses are pre determined. You wont be able to do that so your taking on a lot of risk. Anything could happen, absolutely anything. Will there even be a euro 2 years from now? What if the loan converts to new Lennies Pennies and that currency is massively devalued against CAD? Ouch

If the Euro mortgage turned into Lenny pennies then he would win big time. By borrowing in Euro he could only lose if the Canadian dollar devalued and rents didn’t increase fast enough to compensate.

In any case I think the Cad will outperform the Euro over the next decade or so, but I’m not going to bet 100k on this view.

Btw the reason Austrian banks are in so much trouble is because they gave euro mortgages to buy-to-let cannys to buy houses in non-euro countries like Hungary. Those currencies collapsed so the rental income collapsed in real terms, but the euro mortgage repayments stayed the same. If the cannys had borrowed in the local currency then they might have survived.

What if he took a euro denominated mortgage which remained in euros while his earnings turned to Lennies Pennies. Then he’d be screwed. Thats more what I was trying to suggest.

I am assuming his earnings would be based on the nine months of renting the property.

I don’t think his Irish earnings come into the equation unless he plans on leaving it idle for those nine months.

Get two mortgages from the same company - 1/4 in euro, 3/4 in loonies…

Same applies whether CAD or EUR in that situation. Just my 2.964 cents eh.

Is this a possibility?

Dunno :smiley:

But it would do no hard to ask…

Just don’t buy.

Why not buy? There has been no property bubble here - the house will hold its value [unless canada goes down the tubes]. I will be spending a considerable amount of time here over the next 10 -15 years - It would be nice to have a base, that family and friends could use. There is the possibility of renting out for short periods to tourists (cover 5 to 6 months of mortgage in 2 months). I’ll be here minimum three months. The mortgage repayments would be just short of 400 Euro a month plus 150 euro property taxes a month.

Its a lot of hassle and not a money making investment - but long term it could work out (providing the euro doesn’t implode…)

You would want to be nuts to take out a mortgage in a currency other than the currency in which the home exists

You are taking a massive FX gamble, which could go either way. Everyone hated the CAD a few years ago and now they hate the EUR. Unless you have a ver strong view on CAD v EUR just keep it simple and keep the motgage in CAD

I am not joking here, but kno of someone in the UK who took out a mortgage in JPY on a UK property. His debt just went up by 40% over the last 2years as the JPY went ballistic. No idea if he tried to get out of it on th way down. But the point is, you are effectivey doubling your risk if you take a currency mis-match. Becaue if for some reason your mortgage was in EUR and Canada experienced a massive slow-down based of China having a severe recession, its likely your CAD housewould be falling as your debt in EUR is growing (in Cad terms)

If you are concerned about the currency risk then you obviously must be concerned about the future economic situation. Why take that risk? You’d be paying 6.5k per year to own (less any rental income from tourists) whereas for 3 months a year you could probably rent somewhere quite comfortably for less than half of that with no currency risk.

No hassle, no stress, and once you are no longer concerned with currency risk etc then you can buy if it seems good to you.

Eh… you may find some people differ:
viewtopic.php?p=422494#p422494

viewtopic.php?p=379310#p379310

In fact that whole thread (but that Crackshack or Mansion link is exceptional!):
Oh, Canada…
viewtopic.php?f=11&t=26324