Should I pay off my foreign mortgage?

I live in Dubai but own an apartment in Europe in which I have about 50% equity and 50% in a mortgage. I use the apartment myself duing my stays in Europe so it is not rented out to anyone for rental income.*

My income is in USD but my mortgage is in the currency of the country where the apartment is. The way my mortgage works is in 2-year fixed periods. At the end of each fix period, the interest rate changes and I can pay a lump sum toward the principal with no penalty (this type of mortgage is very common in the country where the apartment is located). The fix period is up this month and the new rate will be 5.31% (it was 3.39% for the past two years).

Over the past two years the USD has fallen about 22% against the mortgage currency. I have enough USD to pay off the apartment entirely, but I am wondering what the best move is: Do I pay no extra principal, a little bit (say 10%) or just pay it off?

My thought is to not tie up too much money in the apartment, but I also want to protect myself against the fall of the USD. Would you just move a bunch of USD into local currency or maybe gold and carry the 5.31% for the next two years, or is it better to pay it down?

In two years the interest rates could be much higher at which point I could pay it off if need be. However at the same time inflation could work in my favor.


  • Actually the flat is owned by a company which I own 100% of, so I pay “rent” to my own company and it pays the mortgage.

My first inclination would be to pay it off, for two reasons: to avoid paying all that extra interest, and to get out of the US dollar. I’m concerned that interest rates will rise, and the US dollar will drop.

That was my initial thought, but it would use up about 60% of my USD which I’d like to keep in a position to buy a house in the US as the market there weakens. I figure in a year or so, it might be a good time to pick up a great deal in the US for those that have liquid cash.

So I was thinking about knocking 15-20% off my mortgage and staying liquid. This amount would keep my payment about the same (since the rate is moving 3.39 to 5.31) and takes something off the principal).

Once the money is in equity, it is pretty hard if not impossible to pull it back out… certainly not as easy as home equity loans are in the US.

No matter how much equity I have in the apartment, any price rise as well as any fall in the USD helps me in USD terms.

So many variables!

Buying a house in the US? There are so many different markets there, doing so many different things. Is it that much more difficult to sell the apartment in Europe? Lower demand?

I think the question you need to look at is, is your potential mortgage-payoff money making more right now than you are paying in interest on the mortage? Maybe you could re-mortgage the paid-off apartment later, for only what you need for the house… that way there’s be less interest to pay in total.