outside of the box

Dfitz,

I've got USD loans in place and very happy with less than 4% interest… but you have to either be a non resident and/or earn in a foreign currency to qualify:

As a non resident you can often borrow in many of the major currencies (USD/JPY/GBP/EUR/HKD/SGD/CHF) but it varies by bank on whether you have to earn in that currency or not and some banks exclude AU citizens, some don't. In most cases you won't get an LVR > 75% unless you put additional security in place and for some currencies like JPY the LVRs can be lower (e.g. 65%). 

If you are AU resident you'd have to earn in a foreign curency and I guess theye won't be many people who are resident in AU but get paid in USD or whatever – maybe those on a rotation?

There are various brokers and banks (St George, HSBC) out there who can help you if you fit one of the above profiles.

As for currency risk, don't under estimate this! On a $400k loan you would save something like $20k-$25k per annum on interest if you went with USD, but your currency exposure is over the full $400k and currencies can and do fluctuate by up to 10% or more per month. These are often just spikes, but you've got to chose your timing right and be able to ride out those spikes without the bank calling on additional funds to keep your LVR below the agreed level (often 75%), but the exchange rate can work in your favour and then suddenly you've knocked off 5-10% you home loan… but only if you switch to another currency or terminate the loan…

As I said, I've done it (two properties) but I track all exchange rates on a weekly basis and based on the trends and professional currency analysis (for which I pay!) I determine whether to switch to other currencies.

Bottom line is, use foreign currency when the interest differential is significant (like it is now) and when you're confident (or maybe should I say comfortable) with the idea that the currency is like to weaken against the AUD. Don't over extend.