Currency Exchange Advice

Currency Exchange Fluctuations
When buying your dream property in the Costa de la Luz, you must do two things:

Step 1:
Choose your Real Estate Agent and a reputable Lawyer to deal with your property purchase.

Step 2:
Find a foreign exchange company to assist with the transfer of your finds for the purchase.

Ensure that your currency exchange providor explains the entire process to you without using technical jargon. Also ensure that the rates that you are offered are competitive enough to save you money in the process of buying your dream home in the Costa de la Luz. Here in Spain there are many banks and financial institutions that offer currency exchange services, if you would like more information, you can speak to one of our FREE financial services advisors who can help you to find the most competitive rates for currency exchange for you in that area.

Can Currency fluctuation affect your buying power?

Should you find the right property for sale in the Costa de la luz, and you decide to buy that property, for an outright purchase of €180,000. The bank then quotes the exchange rate of 1.65 to £1, which makes £109,091. A month later, after the paperwork has been completed, you then give the bank the authorisation to buy €180,000, However, instead of asking for £109,091, the banks asks for £115,000 an additional £5909 because of the currency exchange fluctuation. The banks rates can change within the short period that it takes to complete the paperwork which could cost you more if the wait is longer and the effects could be worse.

Although you are aware that the currency exchange market fluctuated, very few banks and exchange companies inform people of this and show how to prevent this from affecting you. No-one referrs to 'stops' and 'limits', and the automated mechanisms which big businesses use all the time to protect their foreign exchange deals. Also, you may not have been informed that you can obtain a better rate than 1.65 in the first place.

Can you get the best currency exchange rates?
The rate that you are offered is the most important part of the currency exchange. The rate offered by the bank is not the only rate or necessarily the best rate, the larger banks make their money dealing with corporate millions, not by dealing in the sums of money that buy you property for sale in the Costa de la Luz. Shopping around really does pay dividends.

Can you protect your capital?
The example above of currency exchange fluctuations shows the volatility of the foreign exchange market, but is there a way to protect your capital against this? Your foreign currency provider can offer you all the financial mechanisms like 'stops', 'limits', and 'forward contracts' used by large corporations to protect currency exchange capital. The company should also illustrate how these work too.

Buying outright: Property deals take a fairly long time, however, if an opportunity comes round to buy your dream home, a spot transaction can be carried out by your currency exchange company, bought in today's market for cash.

Buying properties under development
Although buying a property is relatively easy (especially with us), what happens if you are buying an off-plan property in the Costa de la Luz? Following the payment of a deposit, and a few equal payments, for which you may not know the amount due and when it is due. The market may move in your favour during the months it will take to conclude the deal, equally it might move in the opposite direction. Unless you take precautions at the outset, you are putting your capital at risk. How can you avoid the gamble?

'Forward' transactions
Forward Transactions are used by most big businesses, for the protection of their capital, there are two versions of this, the fixed forward transaction and the forward Time option. We will show you how these work.

Forward pricing in practice: Let's deal with the fixed forward, which is a contract with your foreign currency provider which suggests if you know the dates for the payments, and the amounts that are to be paid on that date.

Example: You pay a deposit of 10% of the price of the property you want to buy within a few days; another 30% in 3 months' time; another 30% in six months from now; and the full balance at nine months time. If you give your foreign currency provider all this information, they can offer a rate for each of those stage payments which are guaranteed and will not fluctuate.

Forward pricing in practice: The 'forward Time option' It's possible, however, that you know little more than the final price of the property and the developer has promised your house will probably be ready to move into in eight months' time. In this case your foreign currency provider should give you the option of fixing and guaranting a price in the future without restricting you to a fixed date for you to take delivery.

Example: Your currency provider can draw €150,000 between September 1st and September the 15th.

Finally, do not allow the currency exchange company to get overly technical, in reality the process is actually fairly simple, despite terms like 'spot deals' and 'forwards'. Our suggestion is to avoid the exchange companies that try to complicate the situation, they do this to ensure that you cannot progress without them. The varying types of contract that we have explained to you basic products, the exchange company should communitcate their rates to you in a clear and transparent manner.