Buying property abroad can give you a valuable investment as well as welcome respite from the damp British summer. But how can you save money on the transaction?
With another British summer of white cloud and gentle drizzle, it wouldn’t surprise us if there were a gentle increase in the number of people buying property abroad.
After all, the advantages are significant. With flights to popular destinations like France, Spain and Italy often costing less than a train ticket to the nearest city in the UK, it’s easy to use a foreign property as a sunny weekend retreat as well as a base for your annual holiday.
And if you choose the right area to buy property, you can secure some major bargains – especially if you’re willing to invest some money in renovation or modernisation.
Convenience, sunshine, cheapness – buying property abroad in a location you love has so much going for it.
The only problem is getting the money abroad to pay for it.
Exchange rate dangers
Imagine saving up enough money to buy your dream property abroad, only to find that the price has jumped by nearly a third.
It may seem a highly unlikely situation, but it’s entirely possible. Exchange rates between currencies can move by over 30% in only a few weeks, instantly putting your dream holiday home well beyond your reach.
Fortunately, you can avoid this problem by using a currency exchange broker like TorFX, which allows you to fix your exchange rate up to one year ahead.
The service is ideal if you are buying property abroad as it allows you to find a house you like, at a price you can afford – and to keep that price constant as the sale progresses.
That means there’s no danger the exchange rate will make the property unaffordable in the weeks and days before purchase, giving you peace of mind and potentially saving you thousands of pounds in wasted flights and legal fees.
Saving money on the margin rate
When you need to transfer large sums of money from one currency to another, you don’t use a bureau de change like a holidaymaker – unless you want to be stung by a large commission fee.
Instead, the best option is to go to a currency provider that makes its profit from something called the currency exchange margin rate.
The currency exchange margin rate is the additional rate you are charged on top of the interbank rate for converting currency.
Put simply, if the interbank rate for changing Pounds to Euros is 1.13, you may be quoted an exchange rate of 1.11 Euros to the Pound. That means the currency exchange margin rate you pay is 0.02 Euros for every pound you exchange.
Clearly, it makes sense to use a provider that quotes a low currency exchange margin. Currency exchange brokers usually offer the best deals because they specialise in currency transactions, and can afford to give the most competitive rates.
For example, at the time of writing, TorFX is offering and exchange rate of 1.1277 Euros to the Pound, compared to 1.0745 offered by NatWest – meaning you save over 0.05 Euros for every pound.
If you exchanged £100,000, you could save over €5,000 by opting for the deal offered by the currency exchange broker.
£100,000 x 1.0745 = €107,450 (NatWest)
£100,000 x 1.1277 = €112,770 (TorFX)
Other benefits of using a currency exchange broker
If you’re buying property abroad, it clearly makes sense to go to a currency provider that offers you better exchange rates and peace of mind that you won’t be caught out by fluctuating currency rates.
However, there are also other benefits to using a currency exchange broker. For example, TorFX offers you free international transfers, direct access to your own account manager, free online account opening and a service for regular overseas payments. The latter is particularly useful when you have bought your property and you need to transfer money abroad to cover mortgage payments, bills or maintenance.
So, if you are thinking of buying property abroad in the next year or so, it pays to get prepared now.
Visit TorFX’s website today to learn more about its currency exchange services and to open an account.