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Transferring
money
worldwide
When you buy a
property in
Spain, you
will know the
price of the
property in
Euros but you
will not know
the actual
cost until you
buy all of the
currency to
pay for it.
This means
that the
property could
either cost
you more than
you had
planned (if
the Euro
strengthens)
or the
property could
become cheaper
(if Sterling
strengthens).
Recently
Sterling has
fluctuated
more than 10%
against the
Euro within a
matter of
months, so
this does
deserve
careful
consideration.
On the basis
that you are
buying a
property and
not
speculating on
the currency
markets, it is
worth fixing
the exchange
rate for all
of your future
stage payments
to the agent /
developer.
How to fix the
exchange rate
1/ Buy all of
the currency
now on a "spot
contract".
Hold the
currency on
deposit and
send payments
when they are
due from your
Euro account.
To do this you
need to have
full funds
available.
2/ Buy as much
currency as
you can afford
now (e.g. for
the first 2
payments) and
reserve an
exchange rate
for the
remaining
payments. To
reserve an
exchange rate
you need to
buy a 'forward
currency
contract'. In
effect you are
buying
currency now
but paying at
a later date
when you have
the funds
available. The
exchange rate
that you
achieve on a
"forward
contract" is
not quite as
good as that
for a "spot
contract" but
it does
guarantee that
you know the
cost of the
property. You
will be
required to
pay 10% of the
value
immediately
and the
balance by the
date that you
have reserved
the currency
for.
Currency
Factors
Many people
are unaware or
neglect the
importance
that exchange
rates have on
the cost of
their overseas
property and
the currency
risk that is
associated
with an
overseas
purchase.
The majority
of individuals
still use
their bank to
exchange their
currency and
transfer their
funds abroad
even though
they know that
their bank do
not necessary
provide them
with the best
rates, or
facilitate
against
currency risk.
The reason
being they are
afraid or
unsure of the
alternatives.
Recommendations
from friends
and property
agencies can
usually help
to find a
reputable
foreign
exchange
specialist.
There are also
several checks
you can make
to ensure that
you are
getting the
most from your
currency
specialist.
Firstly,
insist on
having a
personally
assigned
dealer
(preferably
the same
dealer that
was
recommended by
your friend or
property
agency). Make
sure the
dealer keeps
you informed
on all issues
affecting your
situation. If
there is a
rate that you
desire, inform
your dealer
and he/she can
contact you or
book that rate
automatically
when it is
achieved. The
dealer’s
ability to
access
up-to-the-second
exchange rates
means that
they should be
able to
significantly
undercut banks
and other
financial
institutions
that quote
daily rates,
however, it is
always a good
idea to get
quotes from
your bank to
ensure that
your dealer is
giving you the
best rates.
The currency
market can
fluctuate
dramatically
and the actual
cost of
foreign
currency
depends on the
timing of your
currency
purchase, this
is known as
currency risk. The
ability to fix
the exchange
rate when the
market is
favourable for
some time in
the future
removes
currency risk.
This can be
done using a
forward
contract, but
there are
other
mechanisms
that may suit
your
particular
circumstances.
In summary,
use a
recommended
currency
specialist
that is able
to offer a
personal
service and
strategies
that can
alleviate
currency risk.
These simple
guidelines
could save you
not just
money, but
time and
effort.
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