How to get the best foreign exchange rate when you pay for your house abroad:
First bit of advice, do not go to your bank!
The rate can make a huge difference. if you’re buying a €250k house and the bank offers you a rate of 1.36, the house will cost you £183,824. By going to an independent broker, you will get a much better rate. For the same property, for example, you may get a rate of 1.38 so the same house would cost you £181,159 a saving of nearly £3k, which could be a new kitchen!
Buying a house abroad can be slow. The notaire will undoubtedly take more time than a solicitor would in England. In the time between putting an offer in and the sale completing, a lot can happen in terms of rates. It could very much go in your favour, or, it could go drastically against you. Therefore, it’s best to speak to a foreign exchange broker very early on in the process. Unlike financial advisers and solicitors, an FX broker will offer their advice completely free. They will be able to help you plot your payments to make the most of a good rate or perhaps advice you to hold off as long as possible.
By going to an FX broker early, they can help create a plan. There are several services an independent FX broker can offer property buyers that a bank quite often won't. One of these is to create a schedule whereby you buy half of your required currency immediately so you’ve got half at a competitive rate, and then if they advice you that the rate looks like it’s going up, they’ll perhaps suggest you buy the second half in small chunks, every time the rate moves in your favour. You have the security of knowing that you’ve got half of the amount already, and then potentially could benefit hugely from another rise in the rates.
Another option that your broker may discuss with you is a forward contract. If you don’t need to make the large payment of your house abroad for another 6 months/a year for example but the rate is excellent at the present time, you can put a deposit down to secure that rate to then use it when you actually make the payment in a years time. If the rate has gone up since you secured the forward contract, you can use that instead. The contract just protects you in case the rate drastically goes against you.
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