There are a number of programs available to UK mortgage customers where the provider manages the currency. Normally they rotate between 4 currencies with the idea that the FX movement results in lower debt repayment over time.
There is also the carry trade which is very big business. People borrowing in Yen or Swiss Francs and then investing in the currency of New Zealand and other places that pay a high interest rate.
If you read the financial pages you will find a lot of references to the carry trade. Mostly in articles where people are speculating as to when the carry trade will unwind. Aug 2007 saw a large shift yet most of that shift has been reversed from what I have read. It is not something I follow closely so I do not have specific numbers. Very large business.
Note the carry trade can be more than just buying a currency that has a high interest rate. Some company purchases are funded by swapping a position in Yen for a position in the currency needed to complete the deal.
John Corey
Yes, I am familiar with the carry trade, it would be quite hard not to be if you read any paper.
My earlier lengthy post was in reference to the company earlier and their claim that anyone qualifies for a 2% mortgage.
Only residents of Japan qualify for this.
I referenced with links to support, but they were deleted (as spam?) by the mod. So I deleted the rest of my post as I assumed I was not welcome. Haven't came back, until I checked my junk mail box and saw someone replied:
"Looks like all the other folks who have jumped on board to pitch this 25 thing have all removed their own posts and gone away. Does that tell you something?"
As I removed my own post, I didn't wish to be misunderstood as being involved or associated at all with this company.
That's all, not meaning to start arguments or complain.
Steeny,
My comments on the carry trade were not directed any you or anyone specific. More for the historical value of the thread. Future readers who wade through the discussion and want to understand further.
I see that you help investors outside of Japan buy RE in Japan. Do you work with investors going in the other direction?
BTW - I find the way you handled the email address on the site painful. It is not that easy to read and you can not click on it or otherwise copy and paste. Maybe something to improve.
John Corey
My comments on the carry trade were not directed any you or anyone specific.
Sorry, I'm just in defensive/oversensitive mode here. It is dissipating slowly now.
On our website? I appreciate all feedback, cheers.
Though the email layout is intentional and seems to be having the desired effect.
This is to filter out casual enquiries. With all enquiries at present, we know there is at least a modicum of motivation.
Cheers
Hi guys,
Some of my thoughts.
If 2% loans exist in Japan that is grate for them, but it worthless for me.
If I were offering to refinance my house for example with some European bank with 0% interest, I would think twice before I do so. :roll:
Let’s look at some numbers;
My loan $500,000 interest 5%, so for last two years I pay $50,000 in interest.
Let assume I refinance it two years ago into Euro with 0% interest.
So $500,000*0.85(USD to EUR two years ago), my new loan = 425,000 EUR with 0% interest. By now my loan would be 425,000*1.47 (EUR to USD now), =624,760 USD.
So if I have to sell my house now my cost for living in it for these two years would be 50,000 USD if I keep my debt I USD. Or 124,760 USD if I refinance it to EUR.
It would be chipper to pay 10% interest in USD.
Please correct me if I’m wrong.
It is a grate idea to have Mortgage Company and offer to silly borrowers to refinance this way.
Now step-by-step a million dollars idea (if we will have same pattern):
1) Create Mortgage Company
2) Borrow from US bank $5,500,000
3) Lend 4,250,000 EUR equivalent of $5,000,000 with 0% fixed for two years (after two years the dept should be paid in full) to some silly borrowers.
4) $500,000 goes to serve you dept.
5) Two years later get back from them 4,250,000 EUR.
6) Change 4,250,000 EUR to 6,247,600 USD.
7) Pocket $747,600. 8)
8.) Become a guru and sell this course for a big $$$$. :mrgreen: :clap: :rock:
Ihor,
You are saying that there is FX risk. Definitely a key thing for people to remember.
The 'carry trade' is all about taking advantage of the interest rate and FX rate difference. It is not normally for unsophisticated investors.
I am a big believer in keeping your RE deals focuses on RE by not adding in FX risk. Keep your loans in the same currency as the company is valued in and hopefully the income is in the same.
I will consider deals that are 2 years or less in duration where the currency is hedged if I am changing currencies.
John Corey
John Corey
Lloyds actually closed their Yen book to non-Yen earners in April due to the size of the Yen book growing very quickly to a size which their Head Office were not happy to see compared to other currencies - most of these new Yen loans coming from US based applicants. It will reopen when it reduces to a more comfortable size.
Current Yen rate is 2.5% and next lowest rate is 4.35% Swiss Francs...assuming you qualify it is really only suitable for those that are fully aware of the fx risk and can look at a long term multi currency loan