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Posted June 26th, 2014 by Charles Purdy

Could exchange rates spoil your property purchase?

Would you go ahead with a property purchase in the UK, knowing that what you pay on completion day could be more than the agreed purchase price? Surely not.
But this is precisely what many British buyers with funds in Sterling do when they complete a foreign property transaction, purely on account of being exposed to the exchange rate.

Thankfully, there is a way to avoid this and it’s called forward buying currency with a forward contract, a solution offered by Smart Currency Exchange.

Forward contracts are especially useful when buying overseas property as they help you to budget and bring peace of mind – often they can save money too. Securing an exchange rate the moment you reserve or commit to a property purchase means the cost in pounds – or whatever your local currency is – of the property’s outstanding balance won’t fluctuate before you complete the transaction a month or two later. Don’t forget exchange rates fluctuate constantly, influenced by a whole range of economic and political conditions.

Here’s a typical scenario of how a forward contract could help you:

British buyer Mr Penny committed to a €300,000 (including buying costs) villa in the Costa del Sol in mid April, paying a €30,000 deposit to secure it. He used Smart Currency Exchange to send the deposit to Spain, saving himself approximately £1,000 by not using his bank.

Prior to looking for his investment, Mr Penny had opened a free, no-obligation account with Smart Currency Exchange – at the time all his money was in a UK Sterling bank account and he knew that with Smart Currency Exchange, when the time came he would be able to call his personal account manager direct and make an immediate currency transfer.

Mr Penny anticipated completing his Spanish property purchase around the end of May. Wanting peace of mind that the Sterling cost of the remaining balance due on his villa wouldn’t change before then, immediately after paying his deposit he asked Smart Currency Exchange to secure €270,000 at an agreed exchange rate, therefore fixing his final Sterling payment. To do this Mr Penny only needed to transfer a 10 per cent deposit into Smart Currency Exchange’s segregated client account.

When Mr Penny completed the purchase of his Spanish home on May 31st, he transferred the outstanding amount due on his forward contract to the segregated client account, and in turn Smart Currency Exchange sent €270,000 to the beneficiary’s euro account in Spain, the money showing in the account the following morning. Mr Penny was handed the keys to his new villa, and is looking forward to numerous family holidays there!

For your free guide on how Smart Currency Exchange could save you money when you transfer funds abroad, click here

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