Buying a property abroad is a lot more common these days than before – with an estimated 100,000 Brits alone doing exactly that this year. And who can blame them – warm climate, great lifestyle – cheaper property and much more. But the same people who would argue a €1 overcharge on a restaurant bill are letting the banks get away with literally thousands either because of blind faith and trust or a complete lack of knowledge.
We’re talking about transferring money.
So how do you ensure you get the best rate for your money?
Very simply you use a currency broker.
You’ve seen the property you want, the price is right, you’ve negotiated the deal, and you transfer the money across from your bank and…. Wham – the property cost you €10,000 more than you thought it would because the bank gave you a lousy deal and added so many charges.
All too often this happens – your friendly bank, trying to help you, are really only helping themselves – to YOUR MONEY. Ouch that hurt. If you have ever transferred money from one country to another you will know that banks are NOT your best friend.
Of course it’s convenient to walk into your high street bank or even an exchange bureau and change your money, and this is fine if you are changing a few hundred Pounds, Dollars or Euros. But for larger transactions then it really pays to use a currency broker. These specialist brokers will offer much better exchange rates than your high street banks because they deal exclusively in money transfers and buy millions of Euros every day.
They also have much lower overheads as they don’t need the back up systems the banks do, the sheer volume of people – cashiers and tellers, nor the large mainframe computers which takes a kings ransom to buy and a and a lottery fund to maintain.
Net result? Currency Brokers offer lower rates. Compare this to your bank who probably transfer a few hundred thousand Euros per week and have to make a larger profit from each transaction and you can easily see they aren’t geared up for high value transfers – whatever they may tell you.
Also unlike many bureaux de change and banks, Currency exchange specialists do not normally charge commission on foreign exchange transactions. The rate that you agree with the dealer is the rate that you will pay. In some cases there is a small telegraphic transfer fee of £15 to cover the cost of the international funds transfer, which delivers foreign currency to the specified foreign bank account, either the same day, or the next working day.
So how do they make their money I hear you ask – what's the catch? No catch. They operate by buying very large amounts of money from the money markets, they can then secure the rates not available to the general public – the headline rate or near to it. ‘They make a small margin (usually less than 0.5% or less, the banks often take a margin in the order of 1.5% to 2.00%, sometimes more) between the rate they buy from the money markets and the rate they sell to you the customer – so small you wouldn’t even notice it if they charged it to you directly.
Doesn’t seem like much but multiply that by millions of Euros per day and a small charge per transaction adds up to a working profit – great for you bad for the banks. So they don’t need to add commissions to their transactions. Unlike the banks who have lots of salaries to pay and regardless of what their advertising tells you don’t have your best interests at heart. They seldom have anyone who knows the money markets at hand to advise you – after all we are not talking an insignificant amount here – these are your hard earned pounds, dollars or euros.
Contrast this with currency specialists and you will find that almost everyone of their staff are fluent in listening and understanding you, and getting the best deal for you on an individual basis – you see they understand that you are a person and have different needs to the next person – so treat you as such.
Its not just better rates that make a currency broker an attractive option. Let’s assume you find a property and you decide to buy it now, but need to come back in a month’s time to complete. You transfer your 10% deposit.
If you did this on June 28th 2005 it would have cost you about £13,350 to transfer the €20,000 deposit. (The rate was around 1.505 euros to the pound). 1 Month later on 20th July – you come over and transfer your money – the rate is now 1.43 (the rate on that day).
Your second transfer cost you £125,874 instead of £119,601 that it would have cost you. A Difference of £6,273 – enough to buy a small car here in Spain with change for a new sofa.
How Do You ensure that the price you agree is the price you pay? In this instance you could fix the rate using a forward contract. What this means is you can fix the rate now by paying a deposit of 10% - 15% and pay the balance when you need the funds – thus ensuring you pay exactly what you thought you were going to pay. Think of it as an insurance policy. You will pay a small premium but it is worth it to know you are covered against fluctuations.
This is also very helpful if, for example, you are buying off plan and there are staged payments. This allows you to fix the price now safe in the knowledge that you will only be paying what you expected to pay. It is possible to fix a rate for up to 2 years in advance but in reality this is only cost effective over 6 to 12 months.
So who you going to call? Well there are many specialists around and all offer pretty much the same rates, although one in particular comes up slightly better consistently. Currency UK (www.currencyuk.co.uk) not only offers excellent rates but offer personalised professional service. That’s not to say the others don’t of course but having used currency UK personally we know they definitely do.
How do you set up an account with a Currency Broker?
In most instances it is very easy. Visit their site online and fill in the form. There is a requirement for all brokers now that they have to verify the person, the address and the funds – so don’t be shocked if they ask you lots of personal information – this is a requirement by law (EU tax Directive and money laundering initiatives).
You will need to show some evidence of your current address along with your passport, together with a declaration as to where the money is coming from. Once the formalities are over, which usually takes a day or so, you will be given an account number. You then agree your rate with the broker, transfer the money and give them the ongoing account to be transferred to. Once they receive the money they usually transfer it within 24 hours.
Some points to note. Once the money is transferred you will be given a transaction code. If the money was transferred by SWIFT then this gives the receiving bank the instruction to release the money. However some banks hold onto the money (especially here in Spain) for anything upto five days. If this happens take the SWIFT transaction document to your receiving bank and you may be surprised at how quickly they “Find” your money.
Some banks may charge you for receiving this transfer. Before you start sending money you may be wise to agree these fees beforehand (or ask for them to be completely cancelled). Don’t get a nasty surprise when the receiving bank charges you hundreds of euros just for receiving your money.
Is it safe to use a Broker? In short YES. For Currency UK Customers’ funds are held in designated client accounts with HSBC plc. Currency UK is the preferred foreign exchange partner of OFTA, the Offshore Financial Trade Association. All UK foreign exchange brokers of this type are regulated by HM Customs & Excise as Money Services Businesses – and you don’t get much more stringent than this
Is it worth going to a broker? If you’re looking to transfer money from the UK to Spain (or vice versa) you can save a lot of money and time by using a broker. Once set up it is quick and efficient and you can use it for guaranteeing the long term rate, ensuring you don’t pay over the odds for your property because of currency fluctuations. You can also in some instances use the same account to pay regular amounts (like pension payments or mortgages etc). Because all brokers in the UK are regulated you can be sure that your money is safe as houses.
And if nothing else then it is at least worth going to a broker and getting a quick quote to check against the rate your bank offers – you may be surprised at how much your bank are making from you.
For more information about buying in Spain and how to avoid paying too much for your property - check out www.spanishproperty-direct.co.uk/book.htm. For other interesting articles on buying a property in Spain visit the website www.spanishproperty-direct.co.uk - you can even get a free Course of Spanish Lessons.
Vince Barnes is the owner of http://www.SpanishProperty-Direct.co.uk – a website aimed at informing buyers about the process of buying in Spain and keeping up to date with news and regulations affecting the Spanish Property Market. He has also just published the book – “The Insiders Secret Guide To Buying A Property In Spain – The Book Estate Agents Don’t Want You To Read” – available at http://www.spanishproperty-direct.co.uk/book.htm