I live in Australia and our current home loan rate is 6.95% variable
and I am looking for the lowest home loan rate in the world that is
applicable to me here in Australia.  I konw that Japan has 0% but how
will that help me? Please help!

---

Clarification of Question by atano-ga on 07 Jul 2005 19:24 PDT

With regards to the comments made by "drops-ga" My question is do you
mean to say that if I live in Europe somewhere I may be able to ask
the local bank there for a home loan in Japanese Yen and I will get
the Japanese home loan rate - is it right? Or is the home loan rate
2.125% is actually the rate of the home country where the loan is
issued?  Please explain how it works.



Look forward to your reply

Best regards

atano-ga

In Europe you can get a mortgage in Japanese Yen which has a loan rate
of the 3 month LIBOR plus abut 1,25% for the bank, rounded up to the
nearest on eigth. The 3M-LIBOR in YEN is currently at 0,05%. So it
would be 1,30%. Thats 1,375% per year after rounding.

Though the YEN is currently too volatile so most homes I know are
financed in swiss franks at 0,75%+1,25%, so 2,125% after rounding.

Smart people would always switch into the currency that has a tendency
to decrease in value compared to the home currency because this also
decreases the amount outstanding.

In addition you can sell currency options that expire unused 3 out of
4 times to earn the interest due and so basically not have any
interest at all. Though your mortgage usually has to be more than
about $100000 for a bank to do that. And you need a very knowledgeable
bank to be able to get a) foreign currency financing and b) do option
selling.

The comments made by drops-ga is very interesting but would anyone  be
able to elaborate on it  a bit more so I can fully understand how it
works?



Best regards 

atano

G'day Atano,

If you are a normal homeowner, living and working in Australia, I do
not believe that you will be able to find a bank there that will
arrange a mortgage loan in a foreign currency nor a foreign bank that
will make a mortgage loan to you.  Theoretically, they probably could,
but there is no reason for them to go out of their way to meet such a
request since they can probably do enough business without the extra
trouble.
Mortgage banks and mortgage departments in banks are more conservative
than other areas in banking.  We are not talking about financing for a
multimillion dollar realestate project.
And, it is probably in your interest to stick with a loan in the
currency you earn.  Yen interest rates may be very attractive, but if
the exchange rate changes, you could be having to repay a lot more AU$
on the loan.  As Drops-ga says, the Yen is currently to valatile, and
over the life a mortgage this is a constant risk.
Selling currency options to hedge this risk is also probably not
possible for you as a private individual.  Banks in Europe had
problems when they were doing it, because individuals who lost money
claimed that they had not been adequately advised about the risks (in
line with Customer Protection Laws).  The banks have made it virtually
impossible for a normal person to do this now.
Again, it just is worth the banks' efforts.

Sorry for this discouraging comment.
Regards, Myoarin