At Micasamo, our top priority is helping you find the right location and best-fit property in Spain that meets all your needs and expectations.
As part of this process, we consider it essential to protect you from the potential pitfalls when buying a property abroad – which is why we provide an end-to-end service that includes free consultations with legal and residency advisors, relocation advice and support, and ongoing first-class after-sales services.
Having been there ourselves, we really appreciate how easy it can be to forget the important financial matters that need to be factored in as you get caught up in all the excitement of buying a new home in Spain.
This is why we also offer all our clients knowledge and expert advice on financial considerations to ensure they get the very best deal – including ‘hidden’ Spanish taxes, fees and currency transfers.
In this article, we focus on why exchange rates and currency transfer options are especially important when buying a property abroad – and the benefits you can enjoy from using a specialist currency company.
Why are exchange rates so important when buying a property abroad?
Many overseas property buyers are unaware of how significantly the exchange rate and currency transfer options can affect any payments they make abroad. They can prove the difference between you being able to afford the property of your dreams or not.
Being aware of and planning for currency fluctuations – and finding the best transfer options available – are hugely important factors when buying a property in Spain. They affect not only the price of your property but also other costs you’ll need to cover, including legal fees, the deposit, taxes and other related bill payments.
Exchange rates typically change every two seconds – with the FX market trading over $7 trillion daily – which can drastically affect any overseas currency payments you need to make.
For example, the two biggest facilitators of currency transactions (JP Morgan & UBS) offer the polar opposite in terms of a £–€ rate forecast for 2023:
- JP Morgan trades 11% of the market and forecasts a £–€ mid-market rate of 1.07 by June.
- In contrast, UBS trades 10% of the market and expects to see the £–€ mid-market rate at 1.15 by June.
What does this mean for you? Well, if you’re exchanging and transferring £250,000 for a property purchase, for example, this would mean a difference between €267,500 (@ 1.07) and €287,500 (@ 1.15)!
These ‘megabanks’ invest billions each year on new technology, automation, research and algorithmic platforms to give them an advantage in the market. After all, they are the major contributors in placing bets on what will happen next in the market.
However, they somehow suggest the opposite will happen for this year’s £–€ rate. This is because of the sheer number of variables involved that move exchange rates daily, and what each entity deems more important in relation to the market.
The point we are highlighting is that the FX market is one of the world’s biggest and most volatile markets and is a complete gamble. It could literally make or lose you tens of thousands of pounds on a significant transaction like purchasing a property.
This is why we recommend all our clients work with a specialist currency company, like XE, to limit the risk significantly and get the very most out of their money.
Currency companies versus high-street banks
For decades, high-street banks had the currency market all to themselves. As a result, consumers had no choice but to use their bank to exchange money for another currency and then transfer it abroad. Thankfully, times have now drastically changed thanks to the financial technology boom.
High-street banks earn money on interest from loans and mortgages you take out with them. They also invest any money you have on account and profit from those returns. Exchanging currency and sending money overseas is small fry for them compared to these big money earners – and just isn’t their specialism.
In contrast, currency companies have a team of dedicated industry experts that specialise in monitoring exchange rate trends. This is their primary focus, and they go above and beyond for their customers in ways that high-street banks simply can’t.
They offer personalised guidance on currency risk and help their clients secure the most competitive exchange rate, which is especially important when making large international transactions like buying a property abroad.
As currency specialists, these companies also provide superior service options for transferring money overseas, offering significant savings and highly efficient transfer times that no high-street bank can match.
Top six benefits of using a specialist currency company when buying a property abroad
From our personal experience of buying property in Spain, alongside 20+ years of helping our clients purchase their dream homes abroad, we can honestly say that using a specialist currency company like XE is an absolute godsend.
There are multiple reasons why we feel confident in stating this.
Here are the top six benefits you can enjoy:
1. Access to exchange experts and a wide range of FX tools
As we’ve already mentioned, most banks offer international currency exchange services but, as this isn’t their specialism, very few employ foreign exchange experts to keep their clients informed on the latest market movements or talk them through their transfer options.
The only way of finding out a live exchange rate from your bank is to log in to your online banking and go through the process of sending money overseas or by going into your local branch. From there, everything is carried out online with zero personal advice and support – and no protection.
However, by using a specialist currency company like XE, you have access to currency experts 24/7 who will explain how to mitigate your risk when entering the currency market and help you budget correctly to get the most from your money.
You can also get live rates instantly over the phone, or by email or text, at any time. As explained earlier, this is important as the market moves quickly and often by 3% in just one month – that’s a difference of £3,000 on a £100,000 exchange. It all adds up!
As well as working closely with you to create a plan based on what level of risk you are happy to take, currency companies also offer essential FX tools such as rate alerts, limit orders, hedging strategies and forward contracts. If these products are used by 9 out of 10 large UK businesses when sending money abroad, we believe you should be enjoying all the benefits they offer too.
2. Better exchange rates
Currency companies offer highly competitive exchange rates, better than any bank, and at a reduced cost.
As a general rule, banks typically have exchange rate costs of between 2%–5%. This means they would look to profit by £2,000–£5,000 on every £100,000 exchange, for example. This is £2,000–£5,000 of your money you’re effectively just giving away.
On the other hand, specialist currency companies charge less than half of that, creating a potential saving for you of £1,200–£3,000 for every £100,000 exchanged on just exchange rates alone.
3. No currency transfer fees
Typically, banks will charge their customers £10–£100 to transfer to another currency overseas – even if you’re doing all the work yourself! Some banks will offer an incentive with ‘no transfer fees’ but they’ll make that money up elsewhere by giving you a worse exchange rate.
Specialist currency companies will not charge any fees for currency transfers.
A further benefit of using a currency company for overseas currency transfers is that they remove any added stress of making these payments yourself. And, quite frankly, when you’re in the middle of purchasing a property abroad, any stress reduction is very welcome!
Your assigned advisor will handle everything and notify you when your money has arrived in your account, when the currency exchange has been made, and then again when they have sent the onward payment out. They will load the payment to the beneficiary on your behalf instead of you having to do it, while keeping you fully informed every step of the way.
4. High-speed transfer times
It takes, on average, 1–3 working days for customer funds to credit overseas when using a bank, which is no good for those with tight deadlines.
Currency companies are built for instant credit and payment automation, meaning that your funds can be received in £, exchanged, and then credited in Spain in € within 2–3 hours.
5. Personalised expert guidance
The money side of things can be extremely nerve-wracking when buying a property abroad. After all, it’s not every day you spend hundreds of thousands of pounds on one transaction! It can be highly stressful.
However, with a specialist currency company this stress is significantly reduced. You’ll be speaking with someone with vast experience in dealing with customers who have been in the same boat as you. They will get to know you, your requirements, and your risk appetite to ensure you make an informed decision on what to do with your money.
You can reach your dedicated account manager by phone, email, text, or via a FaceTime/Zoom call. There is constant human interaction every step of the way, and they will ‘hold your hand’ through the process as much as you need them to, alleviating a lot of stress and anxiety.
This is in stark contrast to using a high-street bank, where it’s unlikely anyone will be available to help you with this level of financial planning. At best, a bank employee over the phone (or at your local branch) will tell you how much it will cost to transfer the money overseas and may be able to set up the money transfer for you – but there will be no guidance or support as you navigate your way through. You will likely be treated as ‘just another number’.
6. Higher security measures
Another significant benefit of using a currency company when purchasing property abroad is that leaving your money with a specialist currency company is safer than leaving it with your bank. Yes, you have read that right!
The Financial Services Compensation Scheme (FSCS) only protects up to £85,000 of customer money when with a bank. What this means, for example, is if your bank were to go into liquidation and you had £100,000 in an account with them, you would lose £15,000 of your money instantly.
By law, specialist currency companies must keep customer money away from their profit accounts and segregated in its own account – similar to an escrow account. This means that if the currency company goes into liquidation, your money is 100% safe in the separate account and can’t be touched by creditors.
In our experience, specialist currency companies go above and beyond for customers with an overseas currency requirement compared to other options like high-street banks. As a result, they can make a significant difference when transferring large sums of money to the overall cost of your property.
Not only are they less expensive, faster, and more personal, but they are also a safer bet and can protect you from market swings so vast that it could be the difference between a brand-new kitchen or, in some cases, whether you can afford to purchase your dream home abroad at all.
Given the fluctuating value of the pound, we would advise British buyers, in particular, to turn to currency exchange specialists to buy Euros with GBP at the best possible rate – rather than the rate on the day of the transfer. It could literally save you tens of thousands of pounds – and that can buy you an awful lot of tapas in the years ahead!
If you’d like more information about currency exchange and transfer options abroad when buying a property in Spain – or our recommendations for the best currency companies in town – please don’t hesitate to contact the Micasamo team today.