Foreign Mortgages Now Availabe in the U.S.
30-year fixed mortgages are currently available for 6.24% in the U.S. Want a 30-year fixed rate for only 4.43%, a savings of almost 2 percent? Well, mortgages at 4.43% are available in the U.S., but there's a catch - it's a "foreign mortgage," and you'll have to make the payments in Swiss francs, not U.S. dollars.
For example, a $100,000 mortgage would be the equivalent of SF118,430 at the current ex-rate of SF1.1843/$. Foreign mortgages require quarterly payments, in this case SF1,788.60 per quarter (at 4.43%) or $1,510.26, at the current ex-rate. (Quarterly payments at 6.24% on a regular mortgage would be $1,848.46.)
The one-year forward rate for the SF is SF1.1613/$, meaning that the dollar is selling at a one-year forward discount of almost 2%. If the actual ex-rate in one year is close to the one-year forward rate, your quarterly payments would stay the same in SFs, but would increase to $1,540.17 in USD, a 2% increase. Like the interest rate risk on an adjustable rate mortgage, you'd now have currency risk, and your dollar payments would fluctuate on a foreign mortgage, depending on the appreciation (lower USD payments) or depreciation (higher USD payments) of the dollar.
On the upside, if the dollar ever got back up to about SF1.78/$ like in 2001, your quarterly payments in dollars would drop to $1,000.
Read more here in the WSJ.