Things to Consider when Purchasing a House in Europe
Purchasing a property is rarely a stress free undertaking, and buying a home abroad comes with additional challenges. In this article we’ll outline your foreign currency exchange options to help you get to grips with a key aspect of buying a property in Europe.
Bank or a Broker?
When it comes to purchasing a property abroad you have two main options for moving the money needed to fund it: using a bank or a currency broker. Doing your research in this area is imperative as different banks and brokers offer varying deals and options. With enough careful research you’ll be able to find the service provider to suit your needs and potentially save thousands.
Many people opt to use a bank because they think it’s simpler if their money is handled in one institution. You may find this preferable, but if you have regular payments to manage it’s worth noting that most banks will charge a fee for every transaction you make. With the transfer fees being anything from £10 -£40, the additional costs can really add up over the course of the year.
A broker, meanwhile, can help you limit your exposure to the volatility of the currency market and don’t charge fees for any transaction. They can also beat the exchange rates offered by banks by up to 3% – which can result in you getting thousands of extra Euros for your Pounds. Some brokers also assign their clients a personal Account Manager who can give expert guidance and manage payments as expediently and cost effectively as possible.
Buying Property Abroad
Let’s say you have found your dream house in Spain. You will be required to exchange Pounds into Euros to buy the property, and the way you chose to move your money can make a big difference to how much you have to spend.
If you wish to use a bank then it is advisable to make sure you have a thorough understanding of the fees and commission costs involved. If you decide to go down the path of using a currency broker do your research first to ensure the one you chose is authorised by the FCA and operates segregated client accounts to maintain total fund security.
The Currency Market
Having some knowledge of the currency market can be useful if you need to move money to Europe as securing a favourable exchange rate can save you a lot of money. This is particularly important when using a bank because you are unlikely to have an Account Manager to offer guidance on exchange rate movements and market trends.
Some brokers also offer services to help you safeguard your transaction against market volatility, such as the option of fixing a favourable rate for up to two years in advance of a trade; a particularly useful service if you are unsure exactly when you’ll need to move the money. Although fixing a rate does mean you’d miss out if the exchange rate improved in the future, it also prevents you from losing funds if the market moves against you.
The Exchange Rate
If you use a bank to exchange currencies you will need to be confident about exchange rates and how many Euros you would expect to get for your Pounds. A broker can save you up to 3% on the exchange rate compared to a bank which is significant when moving a large sum of money.
Let’s look at an example: Say you had to transfer £200,000 into Euros. If a bank got you a rate of 1.38, a broker could get you a rate of 1.42. On a £200,000 exchange that’s the difference of €276,000 with a bank and €284,000 with a broker; amounting to a saving of €8000 even before you take into account transfer fees and commission costs.
When it comes to such a massive, life-changing event as purchasing a property abroad; research is the best thing you can do. Using a bank or a broker is often down to personal preference, but it is worth making comparisons between the two, and between different institutions, in order to get the best deal for you.