Housing loans can be taken in both foreign and domestic currency. The costs for both types of loans are different.
Usually, housing loans in foreign currencies have lower interest rates, while housing loans in the national currency are higher. However, foreign currency loans are subject to greater risk, which is associated with fluctuations in the exchange rate of the foreign currency relative to the national currency, which have a direct impact on the amount of the loan installment that we will have to pay back every month – in individual months these installments will differ, as they are calculated based on the exchange rate of the day or period. It is also worth knowing that foreign currency housing loans also have an additional cost that the dollar loan does not have, which is related to the currency spread. Spread is the difference between the rate at which the currency is bought by the bank and the rate at which the currency is sold by the bank.
In most cases, banks convert the amount for which a housing loan from the national currency was concluded using the purchase rate, while the loan is repaid by us based on the sale rate, this way of settling the loan makes our debt to the bank relatively larger at the very beginning. It is worth adding, however, that banks have recently begun to enable their clients to repay their foreign currency loan by paying in foreign currency.
Thanks to this, the customer does not have to use the bank’s services when buying a currency – he can buy it even in an exchange office, which allows him to save on the previously mentioned spread, because in exchange offices the difference between the buying and selling rates is much smaller than in banks.
The decision to choose the currency in which the housing loan will be taken is not an easy decision.
It should be significantly influenced by the degree of our flexibility in terms of risk. It is worth adding, however, that in most cases banks allow customers to change the currency of the loan, also our decision is not final and can be changed.