Use A Currency Exchange Specialist

Very often, the exchange rates offered by the high street banks vary considerably from bank to bank.  However, the rates offered by the banks are generally much less attractive than those offered by a Currency Exchange specialist.

Many Currency Exchange specialists can save you up to 4% on the exchange rate offered by high street banks.   On a sizeable overseas property purchase, this can amount to a saving of hundreds, if not thousands of pounds.

No Hidden Charges

Many Currency Exchange firms will guarantee no transfer charges, no commission fees and no overseas bank receiving fees. Unlike the high street banks, Currency Exchange specialists allow you to fix a favourable exchange rate for up to 2 years in advance.  

When buying overseas property, where the cost of the property is payable in another currency, you will have to make one or more international money transfers to complete the purchase. 

The issue needs serious planning, especially if you are buying off-plan, where you will be required to make a number of stage payments during the construction of your property, or, where you buy an older property for renovation, with stage payments to contractors for refurbishment costs. 

Let's look at if you were a UK resident buying in Spain:
 
• The developer will require an up-front deposit in Euros and then further stage payments during construction over the next 18 months, with a final payment on completion.
 
• Whilst you know the price of your property in Euros, the actual cost in Sterling will be determined by the exchange rate you obtain on the Euro payments you make.

• If Sterling strengthens during construction, the cost will decrease.  But if the Euro strengthens, your Euro costs will increase - because a stronger Euro means your overseas property will be more expensive.

• As a result, until you’ve secured an exchange rate, you won’t know the final cost.

Whether you’re buying in Spain, Florida, Dubai or any other country, the principles are the same.

Removing Risk With A Forward Contract

To remove this risk, many clients buy a forward contract.  This is essentially a buy now, pay later option, allowing you to lock into an exchange rate, even if you don’t have all the funds available immediately.  Should the exchange rate get worse, you will not be affected.

If, however, you have access to all of the funds from the start and want to convert them immediately, you can enter into a spot contract.   Unlike a forward contract this is a buy now, pay now option, and you will need to arrange the immediate transfer payment for the full value of the currency bought or sold.

Regular Payments Service

Certain Currency Exchange specialists also operate a Regular Payments Service.  This is particularly useful for those ongoing expenses such as mortgage payments.   Again, the exchange rates are likely to be better than the banks and, what’s more, you save on bank charges!

Simple To Use Service

Once you have selected a Currency Exchange specialist, a dedicated Currency Advisor will typically be appointed to assist you.   The service, when buying property abroad, couldn’t be easier; your Advisor will develop an understanding of your circumstances and should be able to provide you with all the help and advice you need.

By Derick Ivimy

Derick Ivimy is a partner at Principal International. The company is a member of the AIPP which specialises in investment properties around the world. Because they are successful international property investors, Principal International have the expertise to show you how to build a successful portfolio, and only recommend property they are happy to invest in themselves.

He is available to answer any questions you may have about investing in property abroad.  Simply email derick@50connect.com with your question.

Principal International can be contacted on 0800 038 0000 or 0044 (0)1483 748629. They are located at 1st & 2nd Floor, 6 Chertsey Road, Woking, Surrey GU21 5AB. For further information visit Principal International: Investment Property Overseas.

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