Using a Currency Exchange Company

Buying Euros to Pay for your Spanish Property

When you agree to buy a Spanish property you will know the price in euros but the actual cost (in Sterling) of the property will depend upon the exchange rate that you get when you buy the euros. It may seem obvious but many people are often shocked by the cost implications of a sharp move in the exchange rate.

Once your offer on the property is accepted you are exposed to a currency risk until you secure a price to buy euros. If you wait until funds are actually required in Spain, the cost of the property will fluctuate on a daily basis (either become cheaper or more expensive).

Don’t Take a Currency Risk.

To illustrate this we can look at an historical example:

A villa priced at 400,000 euros would have cost £266,666 at the end of June 2005 but increased to £279,720 by the end of July (4.7% in just 4 weeks).

It goes without saying that the reverse could happen and your property could become cheaper if the euro were to weaken but if you are happy with the cost at the start you would be well advised not to speculate and risk paying more.

You have several ways of buying euros, obviously you will have to buy the euros to pay for the deposit on the property straight away but then you have time to decide on a strategy for the balance.

1. If you have all of the funds available for the balance you can buy euros straight away and hold them. You can then send funds to Spain as, and when, required.

1. If your funds are tied up or you haven’t received money from a UK re-mortgage or sale you can fix an exchange rate for all of your future payments using a forward currency contract. This means that you can buy euros now but pay for them later (you will need to pay for only 10% of the reserved currency straight away and the 90% balance each time you need to make a Euro transfer).

1. You can wait and ask your currency broker to watch the rate for you. It is usually best to decide on the “worst rate” you are prepared to accept and stick to this so that if things go wrong you don’t go below a certain level. You can also establish a target price (which should be realistic and not too “greedy”).

1. If you are buying in a new development you will have staged payments to make and this makes it even more vital to fix an exchange rate at the outset as your time frame is much longer.

It is a good idea to shop around when buying currency. Don’t assume that your bank will give you a good exchange rate, but equally don’t assume that the cheapest broker will be best either. You need to find a broker who will offer competitive prices, offer a high level of personal service and have a robust and efficient payments team so that your money arrives safely and on time.

We currently work with HIFX plc, they are based in Windsor in the UK and have offices throughout Spain, they are very helpful, patient and efficient and offer “value for money with great customer service”. It is also worth talking to them about sending monthly payments to Spain (for a pension transfer or to service a Spanish mortgage). One point which makes them even more attractive is that with HIFX you pay zero Spanish receipt charges.

One of the biggest headaches when sending money to Spain is the frankly ‘greedy’ and unjustified receipt fee charged by the Spanish banks (which can be up to 1% so beware). HIFX have worked hard to eliminate this cost and not only send your funds free of charge from the UK but also promise that you won’t be charged a receipt fee in Spain. Very occasionally a payment will attract a fee in which case HIFX guarantee to reimburse you the charge!

HIFX also have direct access to SWIFT, the largest global payment network, which means that they can generate a ‘Payment Confirmation’ immediately.

Regular Payments to Spain

Mortgages

HIFX have also developed a regular currency service for clients sending regular funds to Spain where the transfer fee is free (which could save you £300 p/a).

HIFX will fix and exchange rate for up to 2 years ahead, establish a direct debit with your UK bank and send your mortgage payments to Spain automatically. You cannot miss a mortgage payment in Spain so don’t leave it to chance.

Pensions

If you retire to Spain you can use HIFX to transfer your pension. This means you can relax as you won’t have to talk to your UK bank from Spain and, like the mortgage payments, you only have to re-establish the facility every 2 years. It means that you can fix the amount of euros arriving in your Spanish account each month which will make budgeting easier.

Link to HIFX goes here

Keep an eye on the exchange rate using the HIFX currency converter: www.hifx.co.uk/cc.