As I am sure you are aware, purchasing a property can be extremely stressful. Some people go so far as to say that it is one of the most stressful things you can do in your lifetime. So needless to say, purchasing a property overseas is a pretty challenging process for most. When you purchase a property abroad you’re putting currency exchange into the mix, adding a cherry on top of a many layered cake.
When it comes to transferring a significant amount of money overseas, there are two main options. Both have different perks and shortcomings so it is down to personal preference, but detailed research is of paramount importance.
Many would choose to use a bank because they like their money to move as little as possible. Convenience often comes at a price however, as a high-street bank is likely to charge you processing fees and commission costs. It’s also important to note that if you choose to use a bank it might be wise to have a fairly decent knowledge of the currency market so you can decide when a good time to transfer the money will be, because a bank will not necessarily strive to get you the best exchange rate available.
If you opt to use a broker you will not be charged fees for your transaction. In addition, reputable brokers like TorFX will assign you a personal Account Manager who has an expert knowledge of the currency market.
Some brokers can save you between 3%-5% on your currency transfer by securing you a more competitive exchange rate compared with high street banks. This could amount to a huge saving when transferring a considerable sum of money.
For example, if you had £300,000 to spend on a property in Australia, conducting the currency transfer at a more favourable exchange rate could give you thousands more to spend. A bank might be able to achieve you a rate of 1.9005 (making your £300,000 worth AU$570,172) but a broker like TorFX would get you a rate of 1.9593 – giving you AU$587,790. That extra AU$17,618 could really broaden your property purchase options.
The currency market can change dramatically in the blink of an eye, something that could have a real impact on your property purchase.
If you are using a bank to transfer the money you will have few options for safe-guarding against market volatility. This means you may need a fairly decent knowledge of the market in order to make the transfer at the most favourable time.
With a broker, however, there are options to help you safeguard against this issue. For example, a broker can fix an exchange rate for anything up to two years in advance of the purchase. This has a two-fold benefit as it means you’ll know exactly how much currency you’re going to receive no matter how long the property purchase procedure takes.
The way in which you decide to manage your foreign currency exchange is completely down to you, but it’s always worth looking into your options and seeing what avenues can get you the best return.