US Currency Loans

Viewing 8 posts - 1 through 8 (of 8 total)

Micasa
Member
@micasa
Join Date: 2004
Post Count: 29
May 5, 2005 - 4:30 pm
Hi all,
I just want to ask anyone out there if they have any experience with US Currency loans. I have just been told that an option I have for a home loan is to borrow in US Dollars as I work overseas and earn in US Dollars. I bank with HSBC and apparently they do US$ loans at around 4% (US$ Mark). Does anyone have a home loan in US$ and what are the risk?
Regards
Micasa
Mortgage Hunter
Participant
@mortgage-hunter
Join Date: 2003
Post Count: 3,781
May 5, 2005 - 10:14 pm
Currency fluctuations are the major risk. Can work in your favour as well!
Cheers,
Simon Macks
Finance Broker
[email protected]
0425 228 985
Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Robbie B
Member
@robbie-b
Join Date: 2004
Post Count: 2,493
May 6, 2005 - 2:17 am
US ss also expecting quite significant rate rises in coming months.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.au

Investor Links
Micasa
Member
@micasa
Join Date: 2004
Post Count: 29
May 10, 2005 - 6:14 am
Thanks for the replies. The offer I have been made is: HSBC US$ Rate 3.38% (up to 2% margin). Does anyone know what they mean by (up to 2% margin?)
The other offer I have is with HSBC also using their new Home Reward option starting at 7.24% and reducing over a two year period.
The loan is for A$550000 so if I take the Us$ loan there appears to be a significant montly saving? Seems to go to be true, so there must be some pitfall to it all.
kiwiduvet
Member
@kiwiduvet
Join Date: 2004
Post Count: 92
May 10, 2005 - 8:05 am
2% margin is i think the mark up above the Fed Rate, so if the feds floatiing rate is 3.25 with the 2% margin your loan is 5.25%. just going through it myself so not definite on this.
when the going gets weird the weird turn pro
Robbie B
Member
@robbie-b
Join Date: 2004
Post Count: 2,493
May 10, 2005 - 8:19 am
And we all know that the US is expecting 3 or 4 interest rate increases before the end of the year. With the margin and the currency risk, I would be grabbing an Aussie dollar loan.
Robert Bou-Hamdan
Mortgage Adviser
http://www.mortgagepackaging.com.au

Investor Links
Free Loader
Member
@free-loader
Join Date: 2005
Post Count: 4
May 10, 2005 - 9:17 am
Micasa,
If you are buying a house in Australia there isn’t a great case for borrowing in USD even though you are earning USD.
A A$550K loan converted to USD at the current exchange rate of 0.7735 gives you a loan of USD425K. If the currency falls to 0.7000 you could be A$58K worse off if you have to convert the loan back such as in a sale situation (no principal reduction for simplicity). You also have to factor in what would happen if you change jobs and no longer get paid in USD.
Conversely, if the rate goes the other way you would be better off but you run the risk that the A$ has been relatively strong for a while now and has some significant downside potential. You could hedge against it but anything beyond 3 years gets expensive for the amount involved.
I would reckon that you are better off taking out a A$ loan, not worrying about exchange fluctuations creating a mismatch with the property value and reaping or wearing the gains each time you convert part of your salary to meet the repayments.
That’s my two US cents worth. Good luck,
FL
Micasa
Member
@micasa
Join Date: 2004
Post Count: 29
May 10, 2005 - 9:59 am
Thanks all…I think I will feel more comfortable going with the A$ loan. The 2% mark up on the loan definitely takes the edge of the US$ loan.
Cheers