Cashing in on foreign exchange
04/07/2008
Buying a property abroad, whatever the purpose requires careful consideration. You need to research the country, the buying processes for that country and get your finance in place ensuring that you save money wherever possible. But when it comes to transferring the money to make a payment on your dream retirement property abroad, too many people assume that their bank is the best or only option they have.
They couldn’t be more wrong.
It should be taken into account that a good foreign exchange specialist will offer a more competitive exchange rate on the money required to pay for the property.
Commercial foreign exchange rates should be available on all money transfers overseas, whether it’s a lump sum to pay a deposit, or a smaller figure such as a UK pension, transferred from Britain on a monthly basis to meet living costs, mortgage payments or maintenance.
We recently held a focus group amongst our customers living in Spain to find out what barriers they have faced when buying their property abroad. The group revealed that many felt transferring funds regularly via their traditional bank was expensive, with their banks charging a typical rate of £25 for even the smallest amount. To combat this many people arranged transfers for larger sums of money, however this proved difficult for them to handle and very easy to spend.
Banks charge between £10 and £40 per month for the ‘privilege’ of transferring money from a UK bank account to an overseas account, for example transferring a UK pension over to fund your new life in the sun.
Paying for your own money is hardly agreeable, especially if you are making regular monthly payments that are not of a particularly high sum. Furthermore, your bank will charge commission and offer an unfavourable exchange rate, similar to the one you would receive from a bureau de change when buying holiday money.
To get the best deal you need to look beyond the banks and get in touch with a foreign exchange specialist. Most should have an ‘Overseas Regular Transfer Plan’ to ensure free money transfers of amounts as low as £150, and can save on average £670 per year – money that would go a long way towards helping you to enjoy retirement and its always nice to know that you aren’t paying for your money.
Furthermore, by setting up direct debits, retirees should be able to sit back and enjoy their retirement knowing that their money is secure and will come across regularly.
Avoid the pain in Spain
Spain is the number one retirement destination for Brits, with 65% of people who emigrate to Spain being over 50 years old. When moving to Spain, in addition to the transfer fees, commission, and poor exchange rates charged by banks when sending money overseas, many homeowners are often faced with the extra cost of receiving fees charged by Spanish banks.
Receiving fees can add a significant amount onto the cost of transferring money, for example, if transferring €1000 to cover a monthly mortgage repayment, you could end up paying as much as €60 in receiving charges. However, with agreements in place to waiver such fees with many of the major Spanish banks, a good specialist will not charge lifting/receiving fees on foreign currency transfers, which means that more of your money makes it across to Spain with you.
Specialist foreign exchange brokers are also able to offer a number of other products that the high street banks do not, for example ‘Forward Contracts’. A Forward Contract is a great way to protect against exchange rate movements. It is an agreement to buy or sell a specific amount of foreign currency at a certain rate, on or before a certain date.
Quite simply, it allows you to protect your nest egg from the mercy of exchange rate fluctuations by guaranteeing today's exchange rates on payments you need to make in the future. The value of the British pound to the Euro has dropped from 1.486 in June 2007 to 1.2621 in June 2008 - a total drop of 15.07%. Therefore having a Forward Contract in place under these circumstances would be very beneficial.
Once you have found your dream home in the sun, you can sit back and enjoy your well-earned retirement. But don’t let the prospect of all these costs and fees dampen your dreams. As long as you shop around, and look beyond your high street bank, you are sure to find the best way to transfer your money overseas.
You can contact Currencies Direct on the website linked below or call 0845 130 8148.