At Total Buying Abroad we aim to help make your Portuguese property purchase as straight forward as possible, whilst helping you to save money in the process.
If you are considering buying property in Portugal, the property purchase price will probably be in Euros. If your savings are in a currency other than euros, you will need to consider how to deal with exchanging your currency.
Many people’s first thought is to instruct their bank to carry out the transfer for them by asking them to transfer the money directly from their bank account to pay for the property in Portugal. This can however be an extremely expensive and inefficient way of completing the transfer.
It is therefore 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 high street bank to make the transfer.
Using a reputable currency specialist can reduce the cost of purchasing a property in Portugal and avoid the pitfalls that can be incurred as a result of changes in the exchange rate.
So, how can currency specialists save you so much money?
High street banks make big profits with regard to the transfer of money where it will be exchanged from one currency to another. The banks offer uncompetitive exchange rates as well as often charging high amounts in commissions or fees just to transfer the funds.
Currency specialists offer much better exchange rates when compared to the banks and most will only make minimal charges (that is if they make any at all) for exchanging and transferring your money for you.
On average a currency firm will usually save you between 3-5% of the amount of money transferred when compared to the exchange rate offered by high street banks. So, if for example you were purchasing an apartment in the Algarve costing €185,000. In this case that is a saving of up to €9,250 on the currency exchange alone. Money that would otherwise be in the pocket of the bank and not yours!
But there is still more that a currency specialist can do….
They can also save you a considerable amount of money and worry by helping you to organise the payment for the property in a way that will minimise the effect of any negative currency fluctuations on your savings.
Here are some examples of how:
Mr and Mrs Jenkins have £135,000 to spend on a property in Albufeira. They need to exchange the money into euros straight away and planned to do a “Spot Trade” (what is a Spot Trade? we hear you say- see our Jargon Buster for explanation of this and other currency terms.)
At the time the exchange rate offered by the high street bank was €1.24. They would therefore get €167,400 for their £135,000.
At the same time, a currency specialist was offering a rate of €1.28, at this rate they would get €172,800.
In this example the Jenkins family received an extra €5,400 just by using a currency specialist instead of their bank. But wait… that is 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 (this is called a ‘Forward’- again see our Jargon Buster for the science bit). See the example below.
The Reeves family had their offer accepted on a 4-bedroom villa on the Silver Coast in Portugal. The price agreed was €260,000.
They paid a 10% deposit of €26,000 for the property in February 2016 and got a rate of 1.32 euros per £1 so in pounds their deposit cost them £19,697.
They then had a remaining balance of €234,000 due to be paid upon completion of the purchase. At the current exchange rate at the time of making the offer the balance would have worked out as £177,273.
However in the two months that it took to complete the purchase, the exchange rate fell to 1.26 euros per pound. This meant that the Reeves family would now get fewer euros for their sterling savings and the balance of €234,000 would now cost them €185,714 instead of the £177,273 that they had initially budgeted for just two months earlier.
This means that on completion day, the Reeves family would have to pay £8,441 more for the property than they thought when they agreed the purchase price just two months previous. This would have been disastrous for the family, as they had already had to stretch their finances in order to purchase their dream home.
Luckily for the Reeves family, they had been in contact with a recommended currency specialist when they paid their deposit. At the time the recommended currency specialist had advised them that they should protect themselves from the risk of any adverse currency fluctuations by fixing the exchange rate (called a “Forward”) at the rate that they had when they paid their deposit.
This meant that they were able to transfer the remaining balance on the property purchase at the same exchange rate that it was when they paid the deposit. This meant that they knew the exact amount that they would have to pay on the date of completion without any nasty surprises. By fixing the currency rate of €1.32 euros to £1 with a Forward Trade, the currency specialist was able to save the Reeves family an additional £8,441.
When purchasing a property in Portugal, it does pay to be organised as it can save you thousands of pounds and take the money-worries out of your Portuguese property purchase.
If you would like any further information about currency specialists and how they can help to save you money on your property purchase in Portugal, contact Total Buying Abroad. We will be happy to provide you with details of recommended currency specialists who have assisted many Portuguese property buyers get the best deal on their currency exchange.