Whatever your situation, it is important to identify and minimise the risk that the market may move against you and make the property you are buying more expensive.
Our goal is to make sure you have all the right information and tools you need to protect yourself from fluctuating exchange rates.
Let us assume that you're buying an apartment in Paris. Your currency options depend on whether you have access to some or all of the funds you wish to transfer:
I have access to all of the funds – what are my options?
If you have access to all of the funds, you have two choices: one risk free and one high risk.
The risk free solution would be to buy all of the currency now, thus fixing the cost at the outset (because you will not only know the price of the property but also the cost of the currency to pay for it). This is called buying currency for spot. You can then deposit the bought currency to earn some interest and send payments to the developer as requested.
The high risk strategy would be to buy the currency each time you are required to send them to the developer. This means that you have no idea what the property is going to cost, which could induce some sleepless nights ahead, especially if you are on a tight budget.
I do not have access to all of the funds – what are my options?
If you do not have access to all of the funds at the outset you can still play it safe. The solution is to buy one or more forward contracts.
In essence, a forward contract means that you can buy the currency now, and pay for it later (when you need to make the individual stage payments). You will be required to pay a 10% deposit now and the 90% balance upon the maturity of the contract. For example, if you wish to buy $50,000 worth of Euros but do not need to send them for 3 months, you can agree the exchange rate now, place a $5,000 deposit, and pay the remaining $45,000 balance in 3 months. If the exchange rate moves at all in that 3 month period you will not be affected, as you have bought currency at the originally agreed rate. You can fix a rate on all your currency requirements for up to 24 months in to the future.
I have strong views about future exchange rates – what are my options?
If you have strong views about future exchange rates, you could wait to buy your currency at some stage between agreeing to purchase the property and the date that currency is required. This applies to either buying and paying for all of the currency (a spot trade) or fixing a rate (a forward contract). Either way you are exposing yourself to currency risk.
Alternatively, if you are looking to achieve a specific rate, we can arrange a market order.
This allows you to specify the rate you want to achieve. We monitor the markets on your behalf and, should the market reach your predetermined exchange rate, your currency is bought or sold automatically. Your order is live 24 hours a day and can be amended or cancelled at any time prior to the transaction taking place.
Whichever option you decide is right for you please remember:
We always remind people that they would never agree to buy a property in the US without knowing the final cost. If you agree to buy an overseas property without fixing the exchange rate at the outset, that's exactly the risk you are taking.
Please call us if you are unsure which option is right for you.