Table of contents - Just Landed · Introduction Whatever stage you're at with the purchase of an overseas property, be it buying, re-mortgaging or selling, fluctuations in the currency

Table of contents

Introduction.............................................................................................................................4

Buying your overseas property.......................................................................................... 4

How the rate of exchange will affect the cost of your property..........................................4

Timing is everything!.......................................................................................................... 4

Planning ahead.................................................................................................................. 4

Regular payments..............................................................................................................5

Remortgaging.................................................................................................................... 5

Selling your overseas property.......................................................................................... 5

Buying property abroad .........................................................................................................6

Why use a foreign currency exchange broker?.................................................................6

How shifts in the exchange rate affect you........................................................................7

Reducing your risk ............................................................................................................ 8

Options for currency exchange.............................................................................................. 9

Buy a lump sum of currency needed now (or soon) .........................................................9

Order currency at a fixed rate (for a later date)................................................................. 9

Order currency when it hits a designated rate.................................................................10

Stop loss orders............................................................................................................... 11

Opening an account with a currency exchange specialist ..................................................12

Making regular transfers...................................................................................................... 13

How does the international money transfer process work?.................................................14

Step 1 - Agreeing the rate................................................................................................14

Step 2 – Invoicing............................................................................................................ 14

Step 3 - Transferring the money...................................................................................... 15

Why choose Moneycorp?.....................................................................................................16

Get live prices today!....................................................................................................... 16

Would you like to talk to Moneycorp?..............................................................................16

3Buying Property Abroad: dealing with currency exchange © 2013 Just Landed - www.justlanded.com

Introduction

Whatever stage you're at with the purchase of an overseas property, be it buying,

re-mortgaging or selling, fluctuations in the currency market will affect the amount of

any transaction.

This guide will help explain the different ways to make international money transfers as

well as how fluctuating exchange rates can affect you, and will also introduce some tools

to protect your currency transfers.

Buying your overseas property

When purchasing a holiday home or investment property, timing is crucial. You are buying

a large amount of foreign currency and trading at the right time can save money and help

your financial planning.

How the rate of exchange will affect the cost of your property

Daily swings of three or four per cent can happen, and these shifts will massively impact

the value of any overseas property purchase.

Timing is everything!

Exchange rates move all of the time and this will have a great affect on how much

currency you end up with. As an example, in December 2012 the GBP/EUR rate was 1.24,

but in February 2013 this had dropped to 1.14. These movements play a big role in

transfers and that’s where a specialist currency broker can help. A currency expert will be

able to give you guidance on the markets and help watch the movements in the exchange

rate. They can set up market orders where you can define the desired rate you want to

achieve. Once the market hits that rate, a deal can be triggered. Some currency specialists

also offer forward contracts where you can lock into a rate for up to 2 years.

Planning ahead

You can save significant sums of money if you think ahead. By leaving payments to the


last minute you are forced to accept the rate the market offers that day. While high street

banks are often the first port of call for most international property payments, foreign

exchange specialists can offer homebuyers superior rates, as well as a more

comprehensive range of services that will help protect them from adverse currency

movements. A foreign exchange specialist will be able to help take the hassle out of all

your international transfers, whether they are one-off or regular payments.

Regular payments

If you need to make regular international transfers to cover mortgage payments or

maintenance costs, you can arrange an automated 'regular payment plan'. This type of

service helps facilitate regular overseas transfers, as the funds are collected by Direct

Debit and automatically sent abroad. We recommend you ask your advisor about the

option of fixing exchange rates for a set time period.

Remortgaging

Owners of property abroad who are feeling the economic pinch might be tempted to sell

their overseas homes to help ease their financial situation. Many are faced with either

decreasing house prices, which could mean cashing in too cheaply, or a lack of demand in

the market. An alternative option to selling your foreign property is to remortgage it and

use the proceeds as a financial cushion.

If you have a property overseas, you should review your mortgage from time to time. Just

like when buying a property, it is important to take into account the currency markets when

re-arranging your mortgage.

Selling your overseas property

Although many people think that buying an overseas property will be their last experience

with the property market, this is not necessarily the case. You may find that another

property comes onto the market that you want, or see an opportunity that you wouldn't

have elsewhere. When repatriating, and sending your funds back home, it is important to

transfer your foreign currency back at the best possible time to ensure you get the best

rate. In today's economic climate, it's more important than ever to make the most of

your money.


Buying property abroad

So you’ve found your home abroad and you want to start the process, which involves

transferring large sums of money. The question is, how will you make that transfer? Many

people go straight to their bank when faced with an international transfer without even

considering a currency exchange broker.

Why use a foreign currency exchange broker?

Changes in the foreign exchange market occur every minute of every day. Unlike banks,

foreign exchange currency companies deal with live exchange rates. They can get much

closer to the interbank rate (the rate that banks trade money between one another) than

banks themselves. Banks can create large differences between the rate in which they buy

and sell currency to ensure they are always in profit, in spite of the rate they sell for.

The main focus of foreign exchange companies is mass currency exchange. Special

‘wholesale’ rates can be set, without a middleman and so savings to the client are

maximized. In addition, not incurring hefty bank transfer fees means savings can be up to

5% for each money transfer made. For regular transactions such as mortgage payments,

these fees can add up.


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Foreign currency specialists can take the headache out of transaction fees and lengthy

transfer times, whilst offering a personal service, tailored strategically to complete your

currency transfers efficiently and maximise their value. For lump sums such as down

payments for property, the savings can be significant.

How shifts in the exchange rate affect you

Exchange rates can be very volatile, and large, rapid shifts in the value of one currency

against another are not uncommon. Even a relatively small negative shift of 5% can make

a huge difference to the amount you receive from the currency transfer. Of course, a

positive shift could mean you end up with a higher return than you expected.

Case study 1

Dealing with several currencies

Robert Hawkins has just agreed to buy a property which is being built in a new

development by the sea in Spain. He is working in Switzerland and being paid in

Swiss francs (CHF), and is selling a flat in the UK to pay for the new house. The

developer requires him to put down 10% of the cost now, €50,000, and then pay the

balance, €450,000, when the building is complete in 12 months time.

As he doesn’t have the cash today, he cannot fix the exchange rate by exchanging it

into euros. The problem is, he knows that at the current exchange rate, he will have

enough euros when he converts the pounds (GBP) from the sale of the flat. But a

negative move of just 5% in the exchange rate will mean that he will be short

€22,500, or a 10% move, €45,000. Such moves can happen in a week, never mind

over the course of a year!

The problem can be summarised in the following way: He knows how much this will

cost him in his home currency if he makes the purchase today, but has no idea what

this will be tomorrow.

He might decide that this is a risk he is willing to take as there is also the possibility

of a positive move in the exchange rate which would mean he ends up better off

than he thought.


Reducing your risk

To reduce your risk, you could make a contract to buy the foreign currency at a fixed price

on a fixed date – this is called a ‘forward’. You will normally need to put down 10% of the

contract value as ‘margin’ and there is an underlying cost for this instrument. This means

you can guarantee in your own currency how much the house will cost, while not having to

supply all of the money immediately. Currency specialists can provide this service.

If you are a 'sophisticated investor', there are financial products such as options, CFDs

and other derivatives which you could use to hedge against a negative currency

movement and limit your exposure to risk.

There are various other financial tools that can be used for different circumstances. The

best thing to do is discuss your situation with your specialist foreign exchange broker who

will be able to understand your situation, and suggest solutions. Most importantly, they will

be able explain your options in a way that’s easy to understand.

A currency exchange company can also introduce you to a wide range of foreign exchange

contracts. If you wish to target a rate that is not currently on the market, market orders

(instructions arranged beforehand to buy or sell a currency when it hits a particular rate)

are available to you.


Options for currency exchange

Buy a lump sum of currency needed now (or soon)

This type of purchase is known as a ‘spot contract’. Once you have agreed with an

exchange specialist on the best rate, you need to pay the full purchase amount within 2-3

working days. To do this, you can authorise your bank to do a CHAPS (same-day) transfer

into your specialist currency account.

A CHAPS transfer will incur charges from your bank. To avoid these charges, you can

transfer the money via Internet banking which usually takes 2-3 days. Which method you

use depends on the urgency of the transfer.

Once the money arrives in your currency exchange account, your broker will transfer it into

the currency you’ve chosen and deliver it to the specified destination account.

Order currency at a fixed rate (for a later date)

This option is suitable for people who have regular payments and who want to protect

themselves against sudden changes in their chosen exchange rate.

Currency markets can be quite volatile, and even a small change in the exchange rate can

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Buying Property Abroad: dealing with currency exchange © 2013 Just Landed - www.justlanded.com

significantly increase the price of a property abroad. To protect yourself against future

increases in the rate, it may be better to fix the rate now. This allows you to fix your budget

and avoid unexpected increases in costs.

This type of transaction is known as a ‘forward’ and allows you to fix the rate for several

months. You usually have the option to fix the rate on a particular date, or choose a fixed

rate for a set period of time, for example three months.

To secure the rate, you will have to pay a deposit (usually 5-10%) within two days of

placing the order. The money is held in your specialist currency account and paid on the

date specified at the rate you fixed in advance.

Order currency when it hits a designated rate

This option is ideal for people who don’t need to move money at a specific time. If you

know you need to move money over the coming months, your currency broker will be able

to advise you on an achievable beneficial exchange rate. When the market hits the

predetermined rate, your broker will buy the currency. This is known as a ‘limit order’.

Currency Case study 2

Transfer when the market hits a pre-decided rate

Mr Johnson is returning to the USA from the UK. He knows the dollar has been

strengthening over the last year and that the current rate is poor. As he didn’t need

all his money in the USA at once, he decided, with his currency advisor, to take it

over in stages.

He decided to transfer £85,000 when the rate reached 1.90 (the rate at the time was

1.56) so when it hit 1.90 a couple of months later, his broker transferred his money

for $161,500 dollars. If he hadn’t waited, he would have only received $132,600. In

effect, he gained $28,900 by using a limit order.


Stop loss orders

Stop loss orders let you budget for a minimum exchange rate (a rate lower than the one

set at the current market level) at which you would be willing to trade. This allows you to

protect the value of your currency when the exchange rate is moving against you. It

protects you from paying more than needed, whilst being pro-actively monitored by

currency professionals at all times.

If you use a stop loss order, whenever you trade you will be protected against large,

sudden losses if the exchange rate moves negatively against you.


Opening an account with a currency exchange specialist

Most currency exchange companies allow you to open an account online, for free, and

with no obligation. Once your account has been approved and is live, you can discuss your

needs with a specialist broker.

It pays to open an account even if you don’t plan on transferring money right away. This

allows you to be prepared for when you want to make a trade. If you don’t open an

account, a broker can only give you an indication of the rate you could receive, not the

live quote.

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Making regular transfers

If you need to transfer sums of money abroad on a regular basis, you can set up a regular

overseas payment plan. These are great for mortgage payments, salary or pension

transfers, tuition fees and property maintenance costs.

When managing your regular international payments, you can choose from

several options:

Fixed domestic currency amount

If you fix the amount you transfer, you will know exactly what is coming out of your bank

account every time. The amount that arrives at the destination will depend on the

exchange rate at the time.

Fixed foreign currency amount

This is the opposite of the option above. You will know what is going to arrive in your

overseas account, but the amount that leaves your home account will vary according to

the exchange rate.

Fix both amounts

You can fix both the amounts, leaving your home account and the amount arriving in your

overseas account.

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How does the international money transfer process work?

Once you have opened a currency exchange account, you will discuss your requirements

with a trader. The process will normally continue as follows:

Step 1 - Agreeing the rate

The trader will quote you the current rate and the cost of the currency for the amount you

need. You can agree to this quote verbally, and once you have made this agreement, the

rate is fixed and cannot be changed.

Step 2 – Invoicing

Once you have agreed to the purchase, you will receive an invoice or ‘contract note’

outlining the exchange details and the account information (the one you have just opened)

where you will need to transfer funds. You will also receive an ‘onward payment form.’ You

need to fill this in so the trader knows where to send the money.

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Step 3 - Transferring the money

Your money will be transferred from your bank to your currency specialist account. You

can do this via CHAPS (same-day transfer, for a fee) or via an online transfer (2-3 working

days, free). The money will then be exchanged into the agreed currency and if it’s a ‘spot

contract,’ transferred into the overseas destination account. For a ‘forward,’ the amount

will sit in the account until the predetermined date and then transferred at the agreed

fixed rate.

Beware of receiving bank charges. Some overseas banks charge a large amount of

money for receiving currency from abroad. It will be worthwhile choosing a currency

exchange company, such as Moneycorp, which limits or eliminates bank fees.


Why choose Moneycorp?

• Better exchange rates than your bank

• No transfer fees on your transactions

• Expert guidance helping you to transfer at the right time

• FSA authorised - giving you peace of mind

Get live prices today!

Go to Just Landed and open an account today. Get access to live prices and advisors to

help you make the best decisions. No obligations. No fees. No hassle.

Would you like to talk to Moneycorp?

We can call you if you fill out the contact form on Just Landed OR you can call us on +44

207 589 3000 (0207 589 3000 from in the UK). Please quote ‘Just Landed’ to make sure

you get your first wire transfer for free.


Table of contents - Just Landed · Introduction Whatever stage you're at with the purchase of an overseas property, be it buying, re-mortgaging or selling, fluctuations in the currency

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