Foreign currency loans are still marginalized in the Federal Republic of Germany.
It is not only the risk-averse German consumers who ignore the immense savings potential, even the local credit institutions are only making moderate efforts to establish loans in Yen and Co.
In Luxembourg and Austria, 30 to 50 percent of real estate financing is settled in foreign currencies, which is not surprising given the cost advantages. A loan in the Japanese yen is to have an effective interest rate of about two percent almost two-thirds less than a euro loan so.
Such conditions open up new perspectives: a yen loan with a value of 100,000 euros can be fully redeemed within 20 years at a monthly rate of 500 euros. At the same time, it takes about 35 years for a loan in domestic currency. The total costs show up with just as impressive difference: If a loan in the euro with a named designation costs around 115,000 euros in interest costs over the entire term, the yen is only about 30,000 euros.
Going to Japan is just one of the options available to German borrowers.
Those who like it less exotic can also save in Swiss francs: a loan of the above order can still be repatriated at less than 50 percent of domestic costs and 10 years faster.
The central argument against financing larger projects in a foreign currency is the existing risk of exchange rate changes. A depreciation of the euro against the loan leads to an increase in the debt and can at worst become a serious threat. Nevertheless, the risks should not be an exclusion reason.
Foreign currency loans are usually actively managed; Uncontrolled losses can thus be excluded. It is possible at any time to withdraw from the financing and return to the euro. Furthermore, borrowers can “switch” and switch to any other foreign currency as required, thus always taking current market conditions into account promptly. Not only does this control the risks, it also makes it possible to take advantage of interest rate changes around the globe during the repayment period.
The risk of a devaluation of the euro is in principle congruent with the chance of appreciation. The latter leads to a reduction in the debt burden it is to a certain extent automatically repaid. The active forex management is offered by the provider in combination with the loan for most foreign currency financing.
The ratio of opportunities and risks overall suggests that financing in foreign currencies is highly likely to be worthwhile. The potential savings are significant, especially in the current market situation.