A useful tool available to expats who wish to finance investment property is a multi-currency-loan.

A Multi-Currency Loan (MCL) normally has several characteristics:

• The Currency loaned is not the currency used where the property is domiciled
• The borrower can normally switch the currency of the loan 
• The borrower can invest to repay the loan in a currency different to that of the loan
• The Loan to value (LTV) ratio is normally limited to a maximum of 75%

Who Might Take On A Multi-Currency Loan?

Multi-Currency loans are useful for expatriates who wish to buy or pay for land or property in a country in which they are not resident. This is because the currency in which their wages are paid is likely to be different to the currency in which they will need to make payment for the property. It is not normally advisable to consider a MCL if the client earns a substantial part of his income in the base currency required for the loan. In these circumstances it would be advisable for the loan to be in the same currency as the property unless there were other extraordinary circumstances (i.e. a single currency loan). An example of this might be the client having other property in a different country, or exposure to the second currency by way of substantial investment holdings in that currency.

Why take on a Multi-Currency Loan?

Taking on a multi-currency loan CAN reduce risk when the loan taken on is in the same currency as the borrower’s income. It can also reduce costs since interest rates in some currencies can be lower than others. However without proper understanding and review, extra risk and cost can be incurred.