As we say goodbye to 2020, many of us may feel like now is the time to finally invest in a property overseas. With markets still adjusting to the new EU rules and regulations, along with the continued battle against coronavirus, there will likely be some volatility in the coming months.
It is impossible to predict currency movements, however, it is crucial that you protect your money against fluctuations. In some cases, the pound/euro exchange can change by 5, 10, and even 20%. This can add thousands of pounds to the price of the property you are looking to buy, potentially making it unaffordable.
To minimise your risk, consider one of these currency solutions when paying for your property abroad.
A forward contract
Maybe you have found your perfect overseas home but are not planning on completing your property purchase for a little while. The legal side of the process can take some time, but of course, you still want to take advantage of strong exchange rates. In this case, many of our clients opt for a forward contract, which can lock in an exchange rate for up to a year.
You will be required to pay 10% of the money now, and the remainder within the next year. So, plenty of time to buy your home!
There are many benefits to a forward contract. For one, it will give you peace of mind that your budget will always be sufficient to buy your chosen property. You can also relax on the day of your payment, as everything will already be in place. Plus, you have the flexibility to pay the remaining balance all at once or spread it out over multiple transfers.
If you are planning to buy an overseas property this year, or need to make regular payments in foreign currency, lock in a forward contract now to ensure that your budget isn’t affected by currency fluctuations.
A spot contract
A spot contract is ideal for property buyers who are ready to make a payment on the day, or in the next few days. Perhaps you have been monitoring the markets and feel that now is the best time to act to avoid worsening exchange rates. Or maybe, you are in the final stage of completing the property purchase, and are concerned about a last minute drop in the value of the pound.
If you choose to go with a spot contract, your trader will lock in your exchange rate straight away. You will then be guaranteed that rate, regardless of any volatility in the following days.
You will be contracted to provide cleared funds within two days, so it is important to consider whether a spot contract is right for you.
Regular Payments Plan
If you are making regular international payments, a Regular Payments Plan (RRP) is an efficient way of managing them. Whether it be for an overseas mortgage, maintenance payments, or even child support, an RRP allows you to automatically schedule transfers.
You can also combine an RRP with a forward contract, meaning that every transfer you do will be at a locked exchange rate for 12 months. This means that your scheduled payments will not be impacted by any currency fluctuations.
An RRP removes the hassle of having to monitor exchange rates, telephoning your bank, and potentially missing payments. Your RRP will be set up after just one conversation with a trader at Smart. Then, all you need to do is schedule a standing order for two days prior to when you need to make the payments, and your transfers will happen automatically.
RRPs are also a fantastic option if you are receiving income from a different currency, such as a UK-based pension or investment income. An RRP will minimise any stress and risk by ensuring that the payments reach you at a set exchange rate. You will never have to be concerned about the value of these payments, allowing you to budget, worry-free.
So, which currency solution is best for you?
Whatever stage of the property buying journey you are at, it is vital to protect your budget so that you are not caught out by changing exchange rates.
Here at Smart, our traders will help find the best currency solution for you. Enquire now!