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Posted April 3rd, 2013 by Charles Purdy

Do not let exchange rates spoil your overseas purchase!

Anyone thinking about an overseas property purchase this year will be conscious of how volatile exchange rates have been since the start of 2013. Against the euro, the pound lost considerable value, then gained again, and now seems to be unsure where to go next. All this uncertainty isn’t conducive to calculating how much you have to spend on a foreign property priced in euros if your money is still in pounds.

“Thanks to constantly yo-yoing exchange rates, currently not helped by the crisis in Cyprus, it’s impossible to tell you today how many euros your pounds would buy you when you needed to send payment to, for example, Spain at a later date,” said Charles Purdy from Smart Currency Exchange, a firm that specialises in helping people send money abroad in the safest and most cost effective way.

“In theory, this means that you can only have a rough idea of what you could afford to spend in Spain – not forgetting you would need to add around 10 per cent to the purchase price for fees and taxes. But there is good news – at Smart, we can actually get rid of this uncertainty.”

How? Smart can effectively fix the price of your overseas property in pounds, as well as the local currency, with something called a forward contract. This works by allowing you to secure an agreed exchange rate with Smart, typically the moment you commit to buy an overseas property, which you can access for up to a year in the future. So, when you did need to transfer funds to complete the purchase of your property – for example a month or two after paying a deposit – you already know what rate you will get. Typically, Smart will ask for a 5-10 per cent deposit of the total value of the required transaction to secure the rate.

Mr Purdy added: “If you don’t want to commit to a rate and can be flexible on timing, another way to secure euros, or another foreign currency, at a preferred rate is with an order to buy. This works by your Smart account manager purchasing currency for you only once your preferred and agreed £/€ exchange rate is achievable. It’s not uncommon for property-buyers to combine an order to buy with a forward contract, just to spread their chances of getting the best rates.”

If you prefer to make a straight, on-the-spot currency transfer to an overseas bank account, using Smart still makes perfect sense. Their exchange rates are typically 2-4 per cent better than the rate you could expect to get from your high street bank and their transfer times are faster too, usually 48 hours.

For more information, download Smart’s free report or call them on 0808 163 0102.


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