Why get a mortgage in Euro?

Currency and exchange rates

When buying a property in Spain, the best is to take out a mortgage in Euro

Should I take out a mortgage in Euro?

When you take out a mortgage on a property in Spain, the best is to take out a mortgage in Euro – the same currency as the purchase price of the property.

Why euro mortgage?

This way, if you later need to sell the property, you are sure that the amount received from the sale will cover the mortgage and not come short due to a different exchange rate when selling the property.

What about the future?

When it comes to the exchange rate between the Euro and the currency of your income, the only thing we know for sure is that the exhange rate will be different tomorrow.

Example

Jane and Jim bought a nice house in Spain in 2011. They did not want to take out a mortgage in Spain, so they re-mortgaged their house in the UK.

They bought the house for 100.000 euros in the summer of 2011, so with the exchange rate at the time (0.90 GBP for 1 €/1.11 Euro for 1 GBP), they borrowed 90.000 GBP on their house in the UK to finance the purchase.

In the summer of 2015, four years later, something happened and they decided to sell the house in Spain.
Now the exchange rate was 0.70 GBP for 1 Euro (1.42 Euro for 1 GBP). So, when they sold the house in Spain for 100.000 euros and sent the money to the UK to pay off the mortgage they had taken out, they only got 70.000 GBP for the 100.000 euros, leaving them 20.000 GBP short.