When and How do I exchange money to Euros?
If you are looking to exchange large sums of money from any currency into euros over a broad timescale, as you would when buying your overseas property think about ways to get the best deal and protect your money against exchange rate fluctuations. There are two ways of securing yourself the best exchange rate within your timescale:
Option 1 - The Default Method – The Spot Contract
The Spot Contract is the most basic and popular foreign exchange product. It is an agreement to buy or sell one currency in exchange for another. You have 2 days to settle the contract, at a price based on the prevailing "spot exchange rate" the current value of one currency compared to another.
Although the spot market lets you buy or sell currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day. Upon receipt of cleared funds currency is available for onward transmission.
Or you may feel that you would like to leave what money you have in your domestic account to accumulate interest and only change your money just before the signing of contracts- this can be risky, however, as the Euro and foreign currency fluctuate in value leaving the final price in your native currency uncertain.
Option 2 - The other way - The forward contract
A Forward Contract lets you buy or sell one currency against another, for settlement no later than on the day the contract expires. Unlike spot contracts, a forward contract eliminates the risk of fluctuating exchange rates by locking in a price today for a transaction that will take place in the future (up to a maximum of 2 years). A 10% deposit is required to secure the contract and is payable within two working days with settlement due on the day the contract expires.
Peace of Mind
This option gives you peace of mind as you know exactly what you will be paying for your property abroad, so that you can budget your finances without any nasty surprises. Also, because you don’t have to pay for the Euros until the maturity date it frees up any money you have and gives you some time to arrange the finance. All you will have to pay is a 10% deposit of the amount you wish to buy with the balance due on maturity of the contract.
This forward contract is also useful if you receive a regular payment, such as a salary or pension, in your native currency but live abroad. In this case you may want to be sure what your monthly income will be up to two years in advance so that you plan your finances. Also, if a French mortgage is paid for out of a foreign currency bank account you can ensure that the monthly outgoings are the same each month by entering into a forward contract.
Playing the Market
If you can afford to take the risk and speculate on the foreign exchange market in the hope of paying a lower price for your property then it may simply be best to buy the Euros spot as and when you need them but for most people the second option makes more sense.
Who do you use??
You have two options: either use a regular bank which you are comfortable with which may not always offer the best deals or speak to a recommended currency specialist who focuses on currency transfers and could well offer you better rates of exchange and more efficient & personal service.
Either way, your money is precious and some free consultancy to explore the options open to you will no doubt be welcome.
Please contact me directly on firstname.lastname@example.org to discuss.