In Your Overseas Home’s latest webinar, ‘Your move, your money’, our very own Onboarding Manager, Paul Harris, answered the all-important questions about currency transfers when buying a property abroad
We’ve included all of the questions and answers in this handy article, but if you’d like to watch the webinar in full, sign up here.
When should I start thinking about currency transfers?
As soon as possible! Understanding how much you want to spend is probably one of the first things you tackle when you’re looking to buy a property. We can help you understand how much you can afford and how much the property will cost you in sterling.
What are the different transfer options available to clients?
The two main contract options are Spot Contracts and Forward Contracts. If you agree a price today and want to transfer the money straight away, you would typically use a Spot Contract. With this, we agree the price and the rate today, you send us the money and we send the euros to their destination. It’s a short-term contract that can be done very quickly.
A very popular contract with our clients is a Forward Contract. You may go on a viewing trip, find a property you love and agree the price in euros. However, it may be three or more months between when you sign and when you complete. During these three months, the exchange rate will be moving constantly. A Forward Contract protects you against this market risk.
If you use a forward, you can fix the exchange rate for up to 12 months, giving you full peace of mind about how much your property will cost in pounds. The only thing we ask for is a 10% deposit. So, you pay 10% upfront and on or before the completion date, you’ll pay the remainder of the balance.
Find out more about how locking in an exchange rate with a Forward Contract can help you avoid losing money. Click here to fill in our form.
Order to Buy and Order to Call
Two other options are also popular – an Order to Buy and an Order to Call. If you’ve budgeted for a specific exchange rate, we can put an order in to target your desired exchange rate. An important thing to stress, however, is that there’s no guarantee that this exchange rate will be hit. So, if, for example, you’d like to transfer your money a rate of €1.20, we can target this, but there’s no guarantee that this rate will be hit.
With an Order to Call, we’ll give you a call as soon as your desired exchange rate is hit. With an Order to Buy, you send the funds to us in advance and as soon as your exchange rate is reached, we’ll buy the currency for you.
Can I merge an Order to Buy and a Forward Contract?
Yes, that’s certainly possible. Have that conversation with your dedicated personal trader and there should be no problem doing this.
What might happen to exchange rates over the course of this year?
The honest answer is, we don’t know! We do produce a Quarterly Forecast, which outlines the events coming up that could move the markets. However, we also stress that it’s impossible to accurately predict where the market will move. This is why working with us from an early stage really helps – we can track the markets with you and keep an eye out for when the pound is strong etc.
What does Smart charge in terms of fees and commission?
Smart do not charge any fees or commission at all – there are no hidden costs involved. We make our money on the difference between the market price and the price that we offer you. Your trader will always be transparent about this.
Can I use Smart for regular transfers, e.g. receiving my pension?
Yes, you can set up a Regular Payments Plan with us. There is a misconception that we only deal with large transfers, but in reality, we understand that your journey doesn’t end once you’ve bought the property.
For example, if you buy a holiday home and need to pay your bills in euros, or cover renovation costs, or if you’ve moved somewhere permanently and need to receive your pension from the UK, we can help to protect these costs with a Forward Contract.
What happens if my property purchase falls through?
We can do various different things to accommodate this – we can roll your contract forward or cancel the contract if necessary. If we do cancel the contract, there may be costs that come out of the deposit, which your trader will talk to you about. However, we can look at keeping the contract in place for a period of time to ensure that these costs are not incurred.
I’m not looking to purchase a property until next year – should I start thinking about currency now?
Yes! It’s certainly right to be thinking and speaking to us about it now. Our sweet spot to help you is within 12 months of your purchase, but we can help you out before this.
Do you deal in currencies other than euros?
Yes, there are very few currencies that we don’t deal with.
How do I know that my money is safe with Smart?
We are a fully regulated payments business. When you transfer your money to us, it will go into a segregated account. So, if anything happens to Smart, your money will just get returned to you. You can read more about security here.
What is the difference between using Smart and using my bank?
When using your bank, you typically won’t get a lot of guidance from them. We come from a risk management and educational stance, which you won’t get with your bank. Also, the banks don’t offer Forward Contracts and they will usually be very vague with the exchange rates.