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Q We have a Spanish mortgage with La Caxia in Lanzarote. The outstanding amount is €84,000. Because of the fall in the value of the pound and the increasing interest rate offered by our Spanish lender (7.37%) we are considering remortgaging our family home to clear the debt. Unfortunately, the exchange rate is so poor that the amount we owe seems to be going up daily. We are also unable to find out the true cost of redeeming our Spanish mortgage. Your advice would be greatly appreciated as I am sure we are not the only ones who took out a Spanish mortgage when buying property abroad. HP
A As far as the Spanish bank is concerned you need €84,000 to redeem the mortgage, so I am not that surprised they are unable to tell you what you owe them in sterling as that is not the currency in which the mortgage is denominated.
But not knowing how much the debt is in sterling is going to make getting a UK mortgage a bit tricky. One way of introducing some certainty into the transaction would be to take out a forward contract for the currency exchange. What this means is that you agree to buy (or sell) a specific amount of currency at a set rate on or before a certain date in the future. This effectively guarantees the rate of exchange and means you are protected from any rate movements .
Your bank should be able to help you with arranging a forward contract, or you could use a company such as Currencies Direct, which specialises in foreign exchange transactions.
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