Whatever stage you’re at with an overseas property, whether buying, re-mortgaging or selling, fluctuations in the currency market will affect the amount you receive from your international payments. The British Pound has had to endure an absolutely torrid time over the last six months.
When purchasing a holiday home or investment property, timing is crucial as you are buying a large amount of Euros – and trading at the right time will mean your money goes a lot further.
Towards the end of 2008 global exchange rates went through their most volatile period ever. Daily swings of three or four per cent have been unremarkable and percentage moves occasionally ran into double figures. On one memorable (and scary) day the Pound fell three and a half percent against the Euro.
These fluctuations will massively impact on the Sterling value of a Euro based property; an example of this is listed below.
Example: A European property that has a value of €250,000 would have cost £186,567 in January 2008, however now in December 2008 it is worth £30,824 more due to exchange rate fluctuations.
Planning ahead can save you significant sums of money. If you leave payments to the last minute, you will have to accept the rate that the markets offer that day, whatever that may be.
While high street banks are often the first port of call for most international property payments, foreign exchange specialists can offer homebuyers superior rates of exchange, in addition to a more comprehensive range of services that will help protect them from adverse currency movements.
A foreign exchange specialist will be able to help take the hassle out of all your international payments – whether these payments are one-off or regular.
Once you have made all your overseas payments to purchase your property, you may still need to make monthly overseas mortgage payments or pay regular maintenance costs.
Currency brokers can also help you with these transfers. They allow you to fix into forward contracts enabling you to lock into favourable exchange rates for up to two years and not have to worry about currency fluctuations.
Owners of property abroad who are feeling the economic pinch might be tempted to sell up their overseas homes to help ease their financial situation. But many are faced either with decreasing house prices, which could mean cashing in too cheaply, or with a lack of buyers as the strength of the Euro is leading to less demand from British investors. An alternative option is to remortgage your foreign property and use the proceeds as a financial cushion.
As in the UK, if you have a property overseas you should review your mortgage from time to time. Just like when buying a property it is important to take into account the currency markets when re-arranging your mortgage.
Although many people think that buying an overseas property may be their last foray into the property market, this is not necessarily the case. You may find that another property comes onto the market that you want, or see an opportunity that you wouldn’t have from the UK.
When repatriating your funds back to the UK, it is important to transfer your Euros back into Pounds at the best possible time to ensure you get the best rate. And it today’s economic climate, it’s more important than ever to make the most of your money.
Information supplied by Moneycorp, 100 Brompton Road, London, SW3 1ER
Web: www.moneycorp.com Tel: +44 (0)20 7589 3000 and quote Flat Hunter,
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