Buying Euros to pay for your Spanish property?

Marcus Lang / HIFX

keywords: Spain, currency, transfer, rates, eurobor, euros, sterling, risk, exchange, property

When you agree to buy a Spanish property you will know the price in euros. The actual cost (in Sterling) of the property depends upon the exchange rate that you achieve to buy the euros. It may seem obvious but people are often shocked by the cost implications of a sharp move in the exchange rate. Once your offer on the property is accepted you are exposed to a currency risk until you secure a price to buy euros. If you wait until funds are actually required in Spain, the cost of the property will fluctuate on a daily basis (either become cheaper or more expensive).

Don’t take a Currency Risk.

To illustrate this we can look at an historical example: A villa priced at 400,000 euros would have cost £266,666 at the end of June 2005 but increased to £279,720 by the end of July (4.7% in just 4 weeks). This is unnecessary and easily avoided. It goes without saying that the reverse could happen and your property could become cheaper if the euro were to weaken but if you are happy with the cost at the start you would be well advised not to speculate and risk paying more.

You would not entertain speculating on currency when buying a home in the UK so why take a chance when buying in Spain!

You have several ways of buying euros. You will have to buy the deposit for the property straight away and then decide on a strategy for the balance.

• If you have all of the funds available for the balance you can buy euros straight away and hold them. You can then send funds to Spain as, and when, required.
• If your funds are tied up or you haven’t received money from a UK re-mortgage you can fix an exchange rate for all of your future payments using a forward currency contract. This means that you can buy euros now but pay for them later (you will need to pay for only 10% of the reserved currency straight away and the 90% balance each time you need to make a Euro transfer).
• You can wait and ask your currency broker to watch the rate for you. It is usually best to decide on the “worst rate” you are prepared to accept and stick to this so that if things go wrong you don’t go below a certain level. You can also establish a target price (which should be realistic and not too “greedy”).
• If you are buying in a new development you will have staged payments to make and this makes it even more vital to fix an exchange rate at the outset as your time frame is much longer.

It is a good idea to shop around when buying currency. Don’t assume that your bank will give you a good exchange rate but equally don’t assume that the cheapest broker will be best either. You need to find a broker who will offer competitive prices, offer a high level of personal service and have a robust and efficient payments team so that your money arrives safely and on time.

Don’t assume that your bank is the best solution:

Shop Around

Bright S.L. encourage you to do your own research but have found Windsor based currency brokers HIFX plc (who also have a local office in Marbella) to be very helpful, patient and efficient. They offer “value for money with great customer service”. It is also worth talking to them about sending monthly payments to Spain (for a pension transfer or to service a Spanish mortgage).

With HIFX you pay zero Spanish receipt charges.

One of the biggest headaches when sending money to Spain is the frankly ‘greedy’ and unjustified receipt fee charged by the Spanish banks. HIFX have worked hard to eliminate this cost and not only send your funds free of charge from the UK but also promise that you won’t be charged a receipt fee in Spain. Very occasionally a payment will attract a fee in which case HIFX guarantee to reimburse you the charge!

HIFX also have direct access to SWIFT, the largest global payment network, which means that they can generate a ‘Payment Confirmation’ immediately.

Regular payments to Spain

Mortgages

HIFX have also developed a regular currency service for clients sending regular funds to Spain where the transfer fee is free (which could save you £300 p/a)

Mortgages: HIFX will fix and exchange rate for up to 2 years ahead,
establish a direct debit with your UK bank and send your mortgage payments to Spain automatically. You cannot miss a mortgage payment in Spain so don’t leave it to chance.

Pensions

If you retire to Spain you can use HIFX to transfer your pension. This means you can relax as you won’t have to talk to your UK bank from Spain and, like the mortgage payments, you only have to re-establish the facility every 2 years.
It means that you can fix the amount of euros arriving in your Spanish account each month which will make budgeting easier. Call 00 441753 859159 or visit www.hifx.co.uk/rpa

HIFXplc

HIFX one of the fasted growing companies in Britain. Working with numerous agents, developers and lawyers their consultants can probably answer most your questions before you ask them but are on hand to calm your fears and make both the currency and insurance aspect of your purchase as simple and cost effective as possible. HIFX plc were featured in The Sunday Times Virgin Atlantic Fast Track 100 as one of the UK’s fastest growing companies in 2003,2004 & 2005. HIFX also enter Reuters’ monthly global FX surveys for dollar analysis and are often in the top 5 global banks and brokers. During the period 2001-2004 HIFX were the most accurate forecasting team in the world. However, in relation to your property transaction, it is not HIFX’s remit to forecast the euro but to protect your hard earned cash!

Keep an eye on the exchange rate using the HIFX currency converter: www.hifx.co.uk/cc.

Call our UK based team on +44 (0) 1753 859159 or speak with our office in Spain (+34) 951 317 345

The details expressed in this article are for information purposes only and are not intended as a solicitation for funds or a recommendation to trade. HIFX plc accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the above information.

January 10, 2006 | Category: Finance & Mortgages