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Why use a currency specialist to transfer your money overseas?
When you’re buying property overseas, one of the most important considerations you will need to make is how you will transfer your funds over to the new country to actually pay for your property.
Exchange rates fluctuate noticeably by the minute, hour, day, and week in response to economic and political events and changes in financial markets. This is so important in an overseas property purchase, as just a small fluctuation in exchange rates can make the difference between being able to buy your home overseas or taking it beyond your budget.
This makes your currency transfer critical due to the time that it can take for a property purchase to complete, which can often take months, and this can affect the price of your home abroad. Many people don’t realise how important this is until it is too late for them to save money on their purchase.
Once they have found their dream place in the sun, they automatically turn to their local bank to send over their deposit payment, followed by the rest of the funds for their purchase. They use the exchange rate they receive on the day, and may pay a high fee on every transfer they make.
When you consider that you will often need to make at least three transfers to complete the entire purchase process, it becomes even more important to think about the exchange rate you achieve and the fee you pay on each one. In addition, after you have purchased your property, you will need to plan for your regular costs i.e. to make mortgage payments, pay living costs or receive your pension – so extra costs on these will all add up.
What is a currency specialist?
A currency specialist is a company whose sole business focuses on navigating the often volatile world of constantly fluctuating exchange rates. This means that the service they offer you will be much more comprehensive than your bank, who deals with numerous different financial issues on a day-to-day basis, with currency being just one of many.
As a currency specialist focuses purely on the business of buying and selling currency and the movements that affect sterling, euros, US dollars and so on. This means that their staff are experts in this field.
How are they different to a bank?
A currency specialist offers specific products and services to help you protect your money and secure your dream property. One of the most popular of these is a tool called a Forward Contract which allows you to set a rate now for a transfer in the future. This protects you from adverse exchange rate movements in the future, allowing you to plan your budget knowing exactly how much you will be spending and receiving in both currencies.
For example, if you have an offer accepted on a property in Spain €300,000, that property would cost you £223,880 in pounds at a sterling-euro exchange rate of 1.34. However, if the exchange rate was to fall to 1.28 while the property purchase is going through and you are waiting to complete, the actual cost in sterling would go up considerably to £234,375 – incurring a substantial loss of £10,495, just from a change in the exchange rate.
Why can they get me better rates than a bank?
Currency specialists can generally offer you more favourable rates than the high street banks; clients of some currency specialists have been known to save up to 4%, compared to the rates offered by their local bank. This means that when you are buying a property in Spain for €250,000, the rates you could receive from your currency specialist may save you up to €10,000.
This is due to the way that specialist currency companies obtain their exchange rates; a bank will usually set their rates in the morning with a wide margin to ensure they make a profit, despite any significant rate fluctuations during the day. In contrast, a currency specialist can utilise the most up-to-date live rates and therefore work on much smaller margins, reflecting a true exchange rate.
How can they protect my money?
Currency specialists can provide specific tools and services to protect your money from fluctuating exchange rates, for example, Forward Contracts, which enable you to secure a rate for your currency transfer up to 12 months in advance. This is particularly useful when exchange rates are uncertain due to economic and political changes, as you can protect the price of your property overseas from going up if the exchange rate were to fall.
It also enables you to budget effectively for any property purchase or regular payments, as if you have secured an exchange rate in advance, you will know exactly what you need to pay in sterling for any future payments.
Are there any fees involved?
Unlike your local bank, who will usually charge you between £20-40 on every transfer you make with them, most currency specialists offer a fee-free service – only charging for the smallest transfers. Just by choosing a currency specialist over a bank, you automatically save money, and it all adds up when you count each currency transfer you need to make.
Is it a safe/secure service?
When you are transferring such a significant amount of money overseas, it is natural to be concerned about the security of your funds. When you choose a currency specialist to work with, it is vital that you ensure the one you choose is authorised and regulated by the Financial Conduct Authority (FCA).
Is it simple to set up an account?
Yes. You can usually do this online using a simple form, or by speaking to a representative over the telephone, who will open an account for you.
At what point would I need to set up an account?
We recommend opening an account with a currency specialist as soon as you know you want to purchase a property overseas. Once you open this account, you have access to the expert knowledge of your personal account manager, as well as the numerous resources and tools that can help you plan your transfer at the best time – minimising your risk and maximising your funds.
One of the biggest advantages of opening your account early is the opportunity to book a Forward Contract, as this protects all your transfers up to one year against fluctuating exchange rates and ensures you can always know exactly how much you need to spend in sterling for each currency transfer.
This means that as soon as you find your dream property, you are able to call your account manager there and then to authorise the transfer of your funds and immediately pay your deposit to secure your property – knowing exactly how much you are spending.
Is it a one-time service or can I use a currency specialist to pay for overseas maintenance/living costs on my property?
You can use a currency specialist for all currency transfers, large or small. Smart Currency Exchange, for example, offers a Regular Payments Plan, which can be used to automatically send regular funds to your foreign bank account.
All you need to do is set up a standing order with your trader and the first payment will be automatically transferred within days, followed by future payments at intervals at your choice. This service is fee-free, and you can also set this up using a Forward Contract, which would ensure that you always know exactly how much money you are transferring every month and can plan your budget with price certainty.
This currency guide was produced in partnership with Smart Currency Exchange