Currency specialist Smart Currency Exchange answers readers’ common questions, helping them – and you – to save money on an overseas property purchase.
Article written by The Overseas Guides Company
I’ve paid a reservation fee for a property in Murcia, Spain. I’m due to pay a 10 per cent deposit (minus the reservation fee) in a week’s time and then I’m aiming to pay the outstanding balance and complete soon. To make these payments I need to send around €100,000 to my lawyer’s Spanish bank account. I still have the funds in pounds but would like to know my options for transferring the necessary funds to Spain, ensuring I get the best exchange rate possible between now and completion.
Smart Says: Firstly, congratulations on buying in Spain, you must be excited about spending time there, or moving there. Your situation is typical of many of our clients, who need to send money to Spain and other countries around the world.
The first thing to do is open an account with us at Smart, so we’re ready to make a transfer or agree a contract when the need arises. Timing counts for a lot when it comes to buying currency. Take 2012 as an example: in January the interbank exchange rate was around £1/€1.19, before rising to £1/€1.28 by the end of July and by November it was hovering around £1/€1.24. This means that the cost to you in pounds fluctuated by almost £6,000.
There’s always speculation about which way the rate will go. You’ll have read how problems in the Eurozone, particularly in Greece and Spain, are helping to drive down the value of the euro, however no-one can say if and when the pound will reach levels seen in the summer, especially given the UK economy is as fragile as much of the EU.
Given your situation, we could suggest a few ways for buying your euros. Firstly, you could wait until the final completion date is due and risk the pound gaining or holding its value against the euro and simply buy your euros with a spot contract. This could work in your favour but if the pound starts losing value before you complete, the cost of your property in pounds will increase as we’ve seen in the past few months.
Or, to secure a favourable rate and for the added peace of mind that the price of your property will remain the same in pounds as well as euros, you could take out a forward contract with us. As a Smart client, we will agree an exchange rate for the full €100,000 – based on the rate on the day you speak to us, so even if the pound weakens you still get the agreed rate. In this instance we will ask for a 5-10 per cent deposit of the total transaction with the remainder payable on an agreed date. After all, when you purchase a property in the UK, you sign on the dotted line because you know how much your property will cost, so why take an unnecessary risk when buying in Spain?
Lastly, you could use a combination of a spot contract and forward contract, so spreading the risk of the pound weakening. We’ll happily talk through your options with you in more detail.
To search for property for sale in Spain, visit the listings on Rightmove Overseas. For more information on how Smart Currency Exchange could save you money when sending money between the UK and your overseas account, download their free report here or visit the Currency Zone.
To understand the full step-by-step process to buying a property in Spain, collect The Overseas Guides Company’s ‘Spain Property Buying Guide’
The views and comments herein are those of the author and do not necessarily reflect the views or opinions of Rightmove Overseas, Rightmove Group Ltd or Rightmove Plc