Yahoo Finance Buying a house abroad: how to save money on the currency transfer
Many of us dream of owning a home abroad. The continental pied-à-terre, Tuscan villa or French farmhouse, whether you are looking to buy a holiday home or let, can be a great luxury or investment.
But purchasing a significant asset in a foreign country in a different currency comes with a particular set of complexities.
If you are planning to buy a property overseas, you will need to transfer significant sums of money. Typically, you will have to make two transfers, first making a deposit and then completing on the purchase.
When thinking about value for money on a property, many people would simply think about geography: is inland France cheaper than Provence? Where can I get the most for my cash – the Costa del Sol, Brava or Blanca?
However, there are large amounts to be saved or lost when transfering the money in order to buy a property, depending on the service you use.
Different providers of transfer services will have different areas of expertise and will offer a range of exchange rates and fees. When it comes to transferring large sums of money, seemingly small percentage point discrepancies in the exchange rate you are offered could mean a difference of tens of thousands of pounds.
Here are some tips on how you can make a saving and how to keep your money safe when transferring large sums.
Choose a specialist
As a general rule of thumb for overseas money transfers, if you are moving any sums over £5,000, you are most likely to get the best deal from a foreign exchange broker.
Exchange specialists such as Caxton FX, FairFX, MoneyCorp and World First offer more competitive rates than high-street banks and generally will not charge you a transfer fee.
Some specialistists claim they will save you as much as 4pc on a transaction. However, say you were transfering £350,000, if a broker offered you a rate even half a percentage point lower than a competitor, you would still make a saving of £1,750.
Unlike most retail banks or high street money transfer providers, a specialist broker offers you the chance to lock in an exchange rate for a future transfer with a “forward contract”.
This can help you to mitigate against any change in the rate than could throw you off your budget, giving you the security of knowing what rate you will get on the day you transfer.
Using such an option could save you a lot of money. For example, at the beginning of December 2016, £1 would buy you €1.19, but six weeks later that had changed to €1.13.
If you were buying a property for €250,000 at that time, it would have cost you around £210,000 in December, but £221,000 in mid-January.
Stay safe
Brokers are not protected by the Financial Services Compensation Scheme, so your money is not protected in the event that the firm goes bust while it holds your money.
The best thing to do therefore, if opting for a broker, is to make sure your money is held in a ring-fenced account. This will ensure your money is held in a separate client account, rather than in the company’s own.
You should also make sure your specialist of choice is regulated by the Financial Conduct Authority, which can be done easily on its website.
Regardless of which transfer provider you go for, the Money Advice Service urges everyone to keep track of all their paperwork and receipts in the event that something goes wrong.
