The main difference with respect to the mortgage loan is that a foreign benchmark index other than the Euribor is used. The usual benchmark index for these mortgages is the Libor which will be linked to a currency other than the euro.
What is the cost of the multi-currency mortgage loan?
If the currency is less valuable than the euro and the index remains low, the loan will be cheaper compared to a loan in euros pegged to the Euribor.
The cost of the loan and the amount of the annual, quarterly and monthly payments will depend on this benchmark index in the same way as for mortgage loans pegged to the Euribor. This index will change and fluctuate over time and may push the amounts up and down.
The huge fluctuations on the foreign exchange market make these types of products highly variable products. The strength or weakness of the chosen currency will therefore determine the cost of the mortgage loan.
Who is this type of mortgage loan targeted at?
Because it is more complex than other types of conventional mortgage loans, this type of loan is mainly aimed at users with high financial literacy.
For multi-currency mortgages signed after June 2019, the latest update of the mortgage law stipulates that:
- The customer can convert their multi-currency mortgage into euros
- The bank is obliged to regularly report on increases in debt that increase the currency value.
- The pre-contractual information on the mortgage loan must specify the amount by which the loan could be increased if the foreign currency-euro exchange rate increases by 20%.