Home » Currency 101 » Forward contracts: a ‘how-to’ guide

If you read our articles and receive our emails regularly, you’ll know that we often talk about how forward contracts are an excellent way to protect your money from the risks of currency fluctuations. You may, therefore, be wondering how to use a forward contract and the process involved.

Luckily, it couldn’t be simpler. So, here’s a quick ‘how-to’ guide on how to protect your money and anything else you may need to know.

 

What is a forward contract?

If you’re looking to buy a property abroad or transfer money overseas, that money could change in value depending on the exchange rate. With a forward contract, you can lock in the current exchange rate for up to a year, so you’ll know exactly how much money you’ll be paying.

If your money isn’t protected by a forward contract and the exchange rate fluctuates, you could end up paying significantly more than you originally budgeted for.

 

How do I start the process?

If you’d like to protect your money with a forward contract or are just curious to know more, all you have to do is fill in this form or call +44 (0)20 3733 1390 to open an account with us. Then, one of our traders will be in contact to talk through your personal requirements and make suggestions accordingly.

Usually, a forward contract is the ideal solution for property buyers. However, if we don’t think it’s quite the right solution for you, our traders can recommend other ways to protect your budget.

 

Once I open an account, do I have an obligation to trade?

No! Opening an account just involves registering your details with us (to comply with UK financial regulations). There’s no need to put money into your account straight away. Once you’re further along with your property buying journey, you’ll have the account set-up and waiting for you, as well as a dedicated trader who’ll be on hand to offer any guidance needed.

 

What happens when I’m ready to buy?

Once you’ve found the property for you, can talk to your trader about the price and when you are planning to pay. The trader can then order your currency at the agreed rate, and you’ll pay 10% to lock in the exchange rate. This is now a legal contract and you are fully protected.

When you come to pay the remaining amount, you simply transfer this to our secure client bank account and we send the required amount in the foreign currency to the beneficiary (usually the property seller’s lawyer).

Even if the exchange rate moves, the money you pay will stay the same, meaning that you will not be at risk of losing out. Your trader will talk you through this process and would be happy to answer any questions you may have.

 

Can I use my forward contract for long term or regular payments?

Yes! You may be paying for a property to be built in stages. Once you move into your property, you may have regular maintenance fees or you might receive your income or pension in a different currency. A forward contract can be used to protect all of these things and more. Take a look at our information about setting up a regular payment plan.

 

I’d like to know more

This article covers the basics, but you probably have more questions about forward contracts and how they work. We’d recommend downloading our handy Property Buyer’s Guide to Currency or getting in touch with our team on +44 (0)20 3733 1390, who would be more than happy to help.

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