Foreign
Currency Exchange Spain
Once you have selected an estate agent on the Costa del
Sol or within Spain and a lawyer, the next important step
is to ensure that you find a reliable foreign currency
exchange broker that will assist you in buying
your Euros. You should make sure that you find a service
that is simple to use and but effective enough to ultimately
save you money when purchasing a property in Spain. Many
banks and independent brokers in the Spanish marketplace
provide this foreign currency exchange service and money
transfers to Spain.
Over the past few years, Sunseeker Homes have worked with Moneycorp who are one of the most
establish foreign currency exchange brokers in the world
to offer our customers total peace of mind with regard to
removing the concerns of currency fluctuations.
Can your power to buy be affected by currency fluctuations?
So let's take a typical example of someone finding a resale property in Spain.
- You have located your perfect
Spanish property.
- It is available right away for immediate
sale.
- You are able to purchase it outright.
- The selling price is 200,000 Euros.
Your own bank offers you an exchange rate of 1.48 Euros
to £1, which equals £135,135. It takes 4 weeks to complete
the paperwork. You then instruct your bank to proceed to
purchase the 200,000 Euros. But, due to currency fluctuation,
the bank requires £140,505 instead of the original total
of £135,135. This is an additional £5370, something that
you might not have bargained for or even budgeted for.
During the month that the bank offered its exchange rate
of 1.48 Euros to the £1 the Euro has strengthened due to
normal currency fluctuations. Now £1 buys a mere 1.42 Euros
(It could have been much worse and could have happened quicker).
When compared to the pound it does not seem to much, but
when buying a property of a few hundred thousand pounds
it makes a lot of difference. You were aware that the foreign
currency exchange market fluctuates from time to time. But
never did you anticipate such an adverse change in such
a short space of time. Even if you were aware of the risk,
you were unaware you could actually protect yourself against
it. No-one at the bank mentioned the subject. No-one mentioned
'stops' and 'limits', the automated processes that large
business uses as a matter of course to safeguard their money
when undertaking foreign currency exchanges. Nor were you
aware that you could have found a more advantageous rate
than 1.48 to the £1 in the first place.
Can you obtain the optimum foreign currency exchange rates?
The exchange rate that your bank in the UK or Spain might
offer to you is certainly not the one and only currency
exchange rate available. And it certainly will not be the
best, simply because the major banks make their money from
dealing in corporate millions, not by dealing in the kind
of amounts that buy a nice property abroad. Shopping around
does pay dividends.
Can you protect your capital?
The earlier property-buying example gives you am idea of the volatility of the foreign currency exchange markets.
How can you protect your capital against such volatility?
Your foreign currency exchange broker should offer you all the available mechanisms such as 'stops', 'limits', 'forward contracts' which large businesses use automatically to safeguard their capital. They should demonstrate how they work with easy examples in a moment.
Buying outright:
The majority of property deals naturally take a certain amount of time. However, if an opportunity arises 'out of the blue' and you have to seize the moment, your
foreign currency exchange broker can carry out a spot transaction. The currency is bought in today's market for cash.
Buying properties under development
Buying a property outright is relatively easy. But what
about if you are buying a new development property in Spain
that is no more than an architect's blueprint and a developer's
plan? You will need to pay a deposit, and then make three
or four further payments a few months apart. You may know
exactly when you have to make each payment. You may know
exactly what proportion of the total amount you have to
pay at each stage or you may not. Although the market could
move in your favour during the months it will take to complete
the purchase, it might just as easily move in the opposite
direction. Unless you take precautions at the beginning,
your capital is being put at risk.
How can you protect yourself against
the risk?
'Forward' transactions
You arrange with your foreign currency exchange broker to use the mechanism that all large businesses use to safeguard themselves when exchanging large sums into a foreign currency: you use what is known as a forward transaction. There are two types: the fixed forward and the forward Time option. We'll show you what each one
is and how they work.
Forward pricing: the 'fixed forward' This is a contract your foreign currency exchange
broker should recommend if you know in advance the dates on which you need to make your staged payments, and the amounts in each case.
Let's say you pay a 10% deposit,
then 40% in 3 months' time; another 20% six months from now; and the remaining balance at nine months. You provide your foreign currency exchange broker with all the details,
and he or she can offer a guaranteed price for each of the staged payments.
Forward pricing: the "forward time" It's possible, however, that you only
know the final price of the property and the developer has promised your house should
be ready in eight months' time. In this situation your foreign currency exchange
broker should give you the facility to fix and guarantee a price in the future without restricting you to a fixed date for you to take your currency. For example, being
able to draw 200,000 Euros between September 1st and September the 15th.
Finally do make sure that the foreign currency exchange broker you deal with keeps the whole procedure as simple as possible. Don't let technical jargon baffle you
in your dealings
with a currency provider because in reality the whole process,
be it spot deals or forwards is actually a simple one. All the different methods
mentioned
above are simple products and their benefits in obtaining
the best currency
exchange rate should be communicated to you in a straight forward manner.
If you would like to be contacted regarding your foreign currency exchange requirements
then please click the button below:
Click
here to get a call back from a Moneycorp member of staff.