Currency
Exchange
Minimizing Risk
and Getting the Best Rate Home Finance
1. Fluctuations in the currency market can significantly affect the cost of your property.
Over the course of your home buying process the currency rate of exchange will inevitably change. From the time you sign the "compromis de vente" or place a down payment (usually 15%-30% of purchase price) to the closing date months later, rate fluctuations in the currency market could in fact push the cost of the home out of your price range.
Example of currency volatility: A property priced at €300,000 would have cost $369,000 in the middle of October 2004. Because of fluctuations in the currency market that same property would have cost $408,000 in December of 2004. The price in Euros remained the same but the cost in Dollars increased by $39,000, or 10.5% in just 2 months. (This example is for buying Euros with US Dollars. Whether you are from Canada, England, Italy, Australia or any other country, the principles are the same.)
2. There are different ways to buy currency and protect against this risk.
There are several options available when you are buying
your currency. The easiest way to look at them is in relation
to your attitude toward the current exchange rate; i.e. if you
are "happy" with the current rate or if you are "not happy".
If you are "happy" you have two options.
The first is
called a "spot transaction." This is when you simply purchase
the necessary amount of Euros straight away and pay for them
in full; a buy now pay now strategy.
The second is known
as a "forward contract" or "buying forward". In essence this
means that you can buy the currency now and pay for it when
you are required to pay the closing cost of the property; a
buy now pay later strategy. If the exchange rate moves at all
over the period of your contract it will not affect you as you
have bought currency at an agreed rate. (This strategy is only
offered by select providers and it is recommended that you
contact a currency specialist for more details).
The third
option is for someone who has been calculating their finances
on a particular exchange rate that is not currently available.
This individual is therefore "not happy" and could employ a
"market order". This is an order in the market to buy
currency, at an exchange rate that is currently not
attainable, and if triggered the currency will be purchased
automatically.
Remember: You are risking your purchasing power! Without fixing the exchange rate or taking out a 'forward contract' at the outset, you are taking a gamble on the cost of your property.
3. Working with an international currency broker gives flexibility, expertise and peace of mind. We can help.
Working with an international currency broker is a simple and effective solution to these challenges, making the important foreign exchange aspect of your international purchase as simple and cost effective as possible. HIFX, Inc. is one such answer. The Private Client Services Team at HIFX understands the purchasing process along with the complications people may experience. HIFX will allocate you a personal dealer who will discuss with you a sensible strategy to suit your specific circumstances.
The international currency broker can also assist individuals settling regular monthly commitments such as overseas mortgage payments. ‘Monthly Payments Abroad’ are structured to streamline any kind of monthly transfer – overseas mortgages or even simply transferring a regular amount of spending money to fund a vacation home. You can even fix the exchange rates, then organize payments abroad for between 6 - 24 months into the future.
Example of the savings in one year if you have a
mortgage of EUR 1,200 monthly:
12 x $25 (wire transfer
fees with your bank) - $300 12 x 2% (commission charged by
your bank) - $207.19
Total savings in year 1 =
$507.19
Total savings over a 15 year Mortgage =
$7,607.86
Trying to set up these safeguards on your own can be quite time consuming and a headache when dealing through mainstream banks. Currency fluctuations can make budgeting impossible. Moreover, international wire transfer fees and commissions charged by your bank often add up to a healthy sum. International brokers, specialists in this field, will often offer exchange rates that are 5% (5 cents on the dollar) better than what you would get at your own bank, saving literally thousands of dollars on large transactions. Working with an international currency broker will save you time and money, and eliminate one unknown from an important property purchase.
P. Douglas Johnson
Private Client Desk Manager HIFX,
Inc.
Doug Johnson assists individual clients with their foreign currency exchange and other international financial needs from the HIFX office in San Francisco.
The service HIFX provides is free for Paris Property Finders clients
and carries no obligation to trade with HIFX.
HIFX service
includes:
• No commission
• Free transfer of funds
• Offices in the United States, England, Australia and New
Zealand
• Commercial exchange rates
• Guaranteed
forward prices (up to 2 years in advance)
To register with HIFX on their website, click here.
For a free, no obligation currency consultation please contact Douglas Johnson in the US office (415) 678 2770 or Dharmesh Patel in the UK at 01753 859159 or e-mail info@hifx.com or click here, filling in your details, and one of the team will contact you at your convenience. Remember to mention Paris Property Finders.
P. Douglas Johnson
Private Client Desk Manager
Office: (415) 678-2770
Toll-Free 1 8667 HIFX US
Fax: (415) 773-1822
E-mail: doug.johnson@hifx.com
Dharmesh Patel
Account Executive
Tel 01753 859159
Fax 01753 859169
E-mail: dharmesh.patel@hifx.co.uk