Here at Total Buying Abroad our aim is to make your French property purchase as stress free as possible and to help you save some money in the process!
If you are looking to buy a property in France, the price of the property will probably be in Euros. If your savings are in sterling (or another currency) you will have to consider how you deal with exchanging your currency. Carefully considering your currency exchange options is one of the easiest ways to save some serious money in relation to your purchase.
Many people automatically assume that they will just instruct their bank to make the transfer to pay for the property as with any other payment. This can however be a very expensive and inefficient way of making the payment.
It is strongly advised that anyone who is transferring large amounts of money from one currency to another uses a recommended currency specialist to exchange the money required, rather than using a bank. Using a reputable currency specialist can significantly reduce the cost of buying a property in France and avoid the pitfalls that can occur as a result of adverse changes to the exchange rate during the process (more on this below!).
So, how can currency specialists save you so much money?
High street banks make big profits by making currency exchanges at uncompetitive exchange rates and also by charging high amounts in commission or fees just to transfer the funds.
A currency specialist however is able to offer you far superior exchange rates when compared to the banks and most only make minimal charges (that is if they take any at all) for exchanging and transferring your money for you.
Let’s look at an example of a purchase of a three-bed property in France costing €150,000. On average a currency firm can save you 3-5% of the amount of money transferred when compared to using your high street bank. In this case that is a saving of up to €7,500 on the currency conversion alone!
But wait! There is still more that they can do…
A currency specialist can also save you a considerable amount of money and hassle by helping you to organise your transfer in a way that will minimise the effect of adverse currency fluctuations on your savings.
Here are some examples of how:
Mr and Mrs Roberts have £150,000 to spend on a house in Limousin. They want to exchange all of their money into euros straight away and planned to do a “Spot Trade” (eh? What the heck is that? Don’t panic – see our Jargon Buster)
Lets say, the exchange rate offered by banks at the time is €1.22
They would get €183,000 for their £150,000.
At the same time, a recommended currency specialist was offering a rate of €1.26.
At this rate they would get €189,000.
In this example the Roberts’ saved €6,000 using a currency specialist, money that would otherwise have just gone into the pockets of their bank. Easy Peasy too. But hang on…that’s still not all.
Here is another example of how your currency specialist can really save you money!
Currency specialists can also provide advice and transfer strategies like fixing the exchange rate to help you avoid the impact of exchange rate fluctuations during your purchase process (this is called a ‘Forward’- again see our Jargon Buster for the science bit). See the example below.
The Bellingham family had their offer accepted for a 4-bedroom farmhouse in the Dordogne. The price agreed was €450,000.
They paid a 10% deposit of €45,000 for the property in early 2016 and got a rate of 1.31 euros to £1 so their deposit was £34,351.
They then had the remaining €405,000 due to be paid by them on completion. At this exchange rate it would have worked out at £309,160.
It then took several weeks to complete the purchase, during which time the exchange rate fell to 1.25 euros per £1. This meant that the Bellingham family would get fewer euros for their sterling savings and the balance of €405,000 would now cost them £324,000 instead of £309,160.
This means that on completion day the Bellingham family would have had to pay £14,840 more for the property than they thought when they agreed the purchase price just a couple of months earlier. This would have been a disaster for the family as they were already stretching their budget to purchase their dream home.
Fortunately for the Bellingham family, they had contacted a recommended currency specialist when they paid their deposit. The currency specialist had advised them at the time that they could protect themselves from the risk of any negative currency fluctuations by fixing the exchange rate (this is a process known as a “forward”) at the rate they had when they paid their deposit.
This meant that they were able to transfer the remaining balance on the property purchase price at the same rate that it was when they paid the deposit.
Therefore the Bellingham’s knew the exact amount that they would have to pay on the date of completion without any surprises. By fixing the currency rate of 1.31 euros to £1 with a Forward-Trade the currency specialist was able to save the Bellingham family £14,840.
The above demonstrates that it does pay to get organised. If you would like further information about currency specialists and how they can save you money on your property purchase in France, contact Total Buying Abroad. We will be happy to provide you with details of recommended currency specialists who have assisted hundreds of people purchasing property in France to navigate the currency markets and will be able to assist you.