Your salary arrives in Swiss francs or another foreign currency, while the desired property and its ongoing costs are paid in euros. Then the loan instalment is not the only decisive factor. You need a traceable transition from the actual receipt of funds to the available euro budget. This article contains editorial planning recommendations for households in Austria and Germany. It does not assess cross-border commuter taxation (Grenzgängerbesteuerung) or the loan approval terms of any specific bank.
First assign each payment to its actual currency
Write down which amount becomes available after the actually applicable deductions and into which account it is paid. A gross salary from a foreign employment contract is not yet a reliable euro payment. Outstanding taxes or other back payments should be kept visible as outstanding items; their calculation belongs in appropriate individual advice.
Also assign expenses individually. Purchase price, loan instalment and many housing costs may occur in euros, while, for example, part of day-to-day expenses continues to be paid in the salary currency. Anyone who converts everything immediately may overlook an already matching comparison in the same currency. For the housing plan, the amount that is actually required regularly in euros is of particular interest.
An exchange rate denotes the relationship between two currencies. The ECB also points out that its reference rates are for information only and do not necessarily reflect the actual exchange rate executed. [KURS] For a real payment plan, therefore, concrete exchange conditions and costs must also be determined. A displayed rate alone does not prove the later account credit.
Calculate two exchange-rate assumptions with the same direction
In the completely fictitious example a household has 4.400 francs per month, which are converted entirely into euros for the simplified comparison. With the assumed relation of 1 euro equals 1 franc, this results in 4.400 euros. With a different assumption of 1 euro equals 1.10 francs, it is only 4.000 euros: 4.400 divided by 1.10.
The assumed total euro expenditures including housing amount to 3.300 euros in both cases. The calculated remainder therefore falls from 1.100 to 700 euros. No less work was done nor was a loan instalment increased. The difference arises exclusively from the conversion ratio changed in the example.
These freely chosen rates are not current market values and not a forecast. Fees, spreads and tax details are not included. A real household calculation must supplement these. The comparison is intended to make the direction of exchange-rate movement understandable, not to claim any specific exchange-rate move or probability.
A fixed euro payment does not eliminate income fluctuation
A debt service agreed in euros that remains constant can be well planned on the expenditure side. The income available in euros nevertheless remains dependent on the conversion. Therefore assess not only whether the instalment formally remains the same, but whether the ongoing household and reserves still fit together even with an exchange that is less favourable for you.
This does not imply a recommendation instead to take out a foreign-currency loan. The currency of a liability is a different decision to the allocation of ongoing household receipts. For existing foreign-currency loans, outstanding debt and, if applicable, repayment vehicles must also be examined. These questions should not be pushed unnoticed into the same simple monthly calculation.
Do not book the reserve again as ongoing income
Our recommendation: Record in which currency a short-term usable reserve is held and which expenses it is intended to cover. In the fictitious model 6.600 euros correspond exactly to two months' expenditures of 3.300 euros. That is a numerical description, not a universally valid recommendation for a sufficiently large emergency fund.
If this reserve is used for the purchase price or incidental purchase costs, it will no longer be available for the same shortage afterwards. A higher exchange value of a remaining foreign-currency balance is also not treated as a secure future offset. Plan only with amounts that are demonstrably available and label conditions.
Enter the purchase decision with a comprehensible overview
For the financing discussion prepare your actual income currency, expense currencies, exchange process and different personal calculation assumptions. Ask the bank to explain which proofs and valuation assumptions it uses for your specific application. The article does not assert a claim to financing nor a particular legally prescribed rate valuation.
A viable decision only arises when the apartment, ongoing household and remaining reserve fit together. The exchange-rate comparison does not replace professional loan assessment or tax advice. However, it prevents a fixed salary amount from being confused with a permanently unchanged housing budget in euros.