Euro Mortgage - should I pay off ?

johnk2345

Hi,

I have got a euro mortgage for a property in Spain that I bought in 2005 when the interest rate was 1.45. With all the uncertainty regarding the eurozone should I consider paying the bulk of the mortgage off now with my life savings or am I mad to consider throwing good money after bad. I transfer sterling funds on a monthly basis to my Spanish account which if I paid off the mortgage I would simply ring fence these funds into a separate savings account in the UK. At the outset I would say that there is little chance of me defaulting on the Spanish mortgage and I still think that the property in Spain is relatively good value compared to what I could have bought in the UK.

holly_hobby

Your issue would be having all your capial in the Spanish Property - which is a particularly ill-liquid market at the moment. So if you needed the return of capital, withdrawal may well be delayed for some considerable time, or you may need to take a large hit to get access.

My own opinion, I would keep the capital in a UK feeder account (with a decent net return), and assess the situ after the euro crisis has stablised somewhat, as I do feel it is far too volatile at this time to make any decision that may have a negative impact on your invesment and the potential loss of real capital value.

Of course this is my own opinon, and sure others will be along with their own - hopefully all comment will help you reach your own decision.

Hope this helps

Holly

chopper78

Cash in GBP and debt in EUR is a good place to be with such a crisis affecting the €uro. What you don't want to do is deplete your GBP and therefore own a European asset, if the Euro crisis gets worse, then you'll get more Euros for your pounds and so the mortgage will get cheaper. But the reverse is true - if inflation starts to soar and the pound devalues (if the government decided to inflate it's way out of debt and make our products cheaper to be attractive for export, for example) then your Euro mortgage becomes more expensive.

So keep an eye on exchange rate trends, but one thing is for sure - no matter what happens to the Euro and in Spain, that mortgage will continue to have to be paid off.

poppy10_2

chopper78 wrote: »

if the Euro crisis gets worse, then you'll get more Euros for your pounds

Not sure that's true. If Greece and Italy leave the Euro, then the value of the euro may actually rise, afaik.

DVardysShadow

poppy10 wrote: »

Not sure that's true. If Greece and Italy leave the Euro, then the value of the euro may actually rise, afaik.

But if Spain leaves too? ....

OP's Spanish debt would fall too in GBP terms, I would imagine.