Article submitted by: Schneider FX and Tradinginthesun.com
Tradinginthesun.com was the first tailor made trading arcade on the costa del sol and occupies prestigious offices in Centro Plaza .
Traders can rent a fully equipped desk daily weekly or monthly.
For general enquiries contact Dick Matthews on 952 817986. dick@tradinginthesun.com
Schneiderfx is a Currency specialist dedicated in helping the individual come to terms with the complexities of the foreign exchange markets.
For general enquiries contact 952 817986 . info@schneiderfx.com
For a lot of people buying a home overseas is the realisation of a lifelong ambition. Even for the most experienced investor this can be an off putting process with one of the most daunting problems being the conversion of your currency
When buying your dream home it is essential to know what the effect of a sharp currency movement could have on its price as at some point you will have to make a currency transaction and more likely than not a series of them
The following example represents how an overseas property purchase can cost far more than you initially anticipated.
On the 11th April 2003 Mr and Mrs Jones had found a property in Europe which was for sale at a price of €150,000 at the time the sterling to euro exchange rate was at 1.46 this gave a price of £102, 740. On the 27th of April 2003 when they came to make their final payment on the house the exchange rate had dropped to 1.38, this now meant the cost of the house had risen to £110 290 a rise of over £7 500 in just over two weeks.
The example is obviously an extreme case but just goes to show how the volatility of the exchange rate markets can have a serious impact on the price of your property
Much of this loss could have been mitigated by setting the rate with a forward contract. A 'forward contract' means that you can purchase the currency now and pay for it later (when you need to make the payment for the property). You will be required to pay a deposit of around10% upfront and the remaining 90% balance upon the maturity of the contract. This allows you to fix an exchange rate today ready for purchase in the future (perhaps up to 18 months ahead) so regardless of what happens to the exchange rate in the period of the contract your fixed rate will not be affected, meaning you can budget for your purchase without worry.
Over the last few years a number of specialist foreign exchange providers have become established. These aim to provide a more individual service than the banks and along with helping you decide how to protect your exchange rate risk they should also be able to provide you with the ability to make very competitive transfers of currency without commission charges.
Once your dream purchase has been made you may still have a mortgage in Euros or be repatriating rental income to the UK again all good currency providers can help you make regular payments.
In closing, and bearing in mind my last article on financial scams, please as always, satisfy yourself that the financial standing and security of the company that you are using is satisfactory. All the reputable companies are regulated by Customs and Excise in the United Kingdom and several have associated companies regulated by the Financial Services Authority but as always ask the awkward question!
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