I’m thinking about investing in a property in a foreign country.
I don’t want to take a mortgage from a bank in that country because interest rates are 3-4x as high as here in switzerland. And they have to be amortized in 10 years.
Now I’m thinking of stocking up an existing mortgage and using that money to buy real estate abroad.
Is that even something that’s possible? Does the bank check where the money’s going?
What are the regulations like? Has somebody here done anything comparable?
Swiss banks usually do not support property investment abroad. Ususally.
And yes, they do check where the money goes in case of mortgage.
The barriere is included in the name of mortgage. The bank want to protect their investment against loss by placing a mortgage registration in the estate records. At abroad they are not able to do this.
It might be possible, maybe with additional conditions. The bank gets your Swiss property as a security (Grundpfand).
You should be frank about what the money is for. Otherwise you’re getting uncomfortably close to the criminal code.
Even setting aside legal technicalities, where do you think the money for ultralow mortgages is going to come from?
For swiss properties the bank’s going to offload the bulk of your mortgage into negative yielding bonds like this, pocketing some 1-2% diff between the negative yields and interest rate you pay. They can do it because swiss properties are seen favorable and safe by the investors and the central banks pushed them to accept negative yieldx on their money.
What about property in your country? Is it as safe and desirable and are investors ready to lose money to back mortgages on it as well?
I don’t know the specific situation of the property you are willing to purchase, but there is no such thing as “interest rate geographic arbitrage”. For further information, please feel free to take a look to interest parity concept.
Amortization period is a fair point, but higher interest rate is IMHO not a relevant factor to take into consideration.
That’s what I’m gonna do. I’ll just be honest and ask the bank for the requirements.
That’s really interesting, thank you for the link!
I’ve never really considered that. I’ll make some calculations in order to determine if it’d even be worth it to get a foreign mortgage.