British Bank, U.S. Partners Offering Florida Home Loans in Multiple Currencies
A new type of Florida home loan now offers borrowers the chance to switch their mortgage between world currencies, capitalizing on market conditions and easing complex transactions for international investors, according to today’s Orlando Sentinel.
Lloyd’s TSB, a giant in Great Britain and Asia nations since the 1970s, has introduced a “multi-currency mortgage” in the Orlando housing market, targeting British home buyers and allowing them to alternate between currencies up to four times a year.
Florida has long been a haven for international buyers of real estate, and this mortgage product signifies a continued global influence on the Orlando market.
“You can change with the markets based on the exchange rates,” said Lee Weaver, Director of Operations of British Homes Group, a Kissimmee, Fla., real estate and mortgage brokerage firm.
British Homes Group has exclusive rights as far as selling the Lloyds TSB Florida home loan in the area. About 90 percent of the company’s business comes through British buyers and sellers. Already, more than 8,000 people from the United Kingdom own homes in Central Florida, mostly in northeast Polk and northwest Osceola counties. About a million visitors a year from the U.K. stream into the Orlando area.
While the bank has been offering similar types of mortgages for about 20 years in Asian countries, it only recently expanded to the U.S.
It offers the product in nine states, all targeting areas where foreign investments are popular. However, the Florida Mortgage Brokers Association says it had never heard of it when first informed of it last week.
In the past, British banks would often simply refer customers elsewhere if they were loan shopping for a home in the U.S. Sometimes a customer would want to pay his or her mortgage in the currency they were paid with, but the bank wasn’t crazy about making loans on property in another country.
But with so much international investing going on in the 21st Century, a greater need for a global outlook on lending has arisen.
“It’s not unusual for us to have clients who have properties in more than one country, dealing with different currencies,” said Lloyd’s TSB Asia executive, Barry Lea.
The Florida home loans do have limitations that range from the locale of the property being purchased to eligibility requirements of the borrower.
Switching currencies involves a certain element of risk, since changes can occur quickly. But the general idea is that customers whose main residence is Great Britain and are paid in euros or pounds can get a mortgage on a U.S. home in one of those currencies, but switch to dollars if desired.
If it is more convenient to sell the property in another currency, or when Florida mortgage rates become more favorable, they have the option. The loan rate can fluctuate, as with an adjustable-rate home loan, and is 1.5 percent above the bank’s three-month cost of funds rate at the time.
While it might seem, under such a scenario, that everyone would suddenly race to refinance in Japanese yen (given that the interest rate there is about 0.43 percent), that is exactly what Lloyd’s officials warn against. Taking out a mortgage in an unrelated currency (or one not related either to the country the property is in or the income supporting the payment) constitutes a danger zone — the company won’t permit it unless the buyer is a financial expert who signs documents showing that he/she understands the risk.
If market conditions shift and exchange rates change, borrowers may find themselves in a situation where their remaining balance exceeds the property value.
The mortgages are designed for overseas home buyers, not unlike the Brits, who already have to deal with two currencies. Or investors who may want to sell properties in two different countries and merge equity into another property in a third country. This type of Florida home loan eases the process, allowing borrowers to build equity under a single umbrella.
