Foreign currency credit

credit in foreign currency is commonly known as a credit contracted by a borrower in a currency other than that of his place of residence.

The currency credit CHF

The loan in Swiss francs is a financial product offered by Swiss and French banks in the border region, to enable cross-border workers to finance their real estate investments in France (primary, secondary or rental homes).

Principle

The bank lends the borrower a capital in Euros to buy a home. This capital is converted in a foreign exchange transaction into a debt in Swiss francs, the borrower then repaying installments in Swiss francs for the duration of his credit.

This EUR / CHF conversion may be prior to the release of funds to protect the borrower from future currency fluctuations (eg in the context of construction). This is called setting up a foreign exchange guarantee, or a currency futures contract .

Advantages

  • By setting the exchange rate for the entire duration of the loan, the frontier worker is not exposed to EUR / CHF fluctuations during the amortization of his loan. If he has opted for a fixed interest rate, his maturities are constant and represent a constant financial effort in relation to his income in Swiss francs.
  • The interest rates charged for a loan in foreign currency are on average 1% lower than those charged for a loan in euros.
  • If it is subscribed in France, the credit in foreign currency allows to benefit from a lower rate while taking advantage of the specificities offered by French banks: zero rate loan plus 1 , fixed rates over long periods, reduced prepayment benefits , guarantee by guarantee …

Disadvantages

  • In case of resale of the property before the end of the credit, a foreign exchange transaction from the euro to the Swiss franc will take place in order to repay the debt with the proceeds of the sale of the property. Depending on the exchange rate of the moment, the operation can generate a gain as a loss.
  • If the borrower no longer has income in Swiss francs, he will be subject to a monthly currency risk or have to convert his loan into his new resource currency.
  • Currency risk is not ignored by banks that are more attentive to a loan in the currency when buying a property in France. The initial investment requested (contribution) is larger than for a loan in euros 2 .

Notes and references

  1. ↑ Loan in currency and PTZ +  [ archive ]
  2. ↑ Contribution for a loan in currency  [ archive ]

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