Whether putting down the deposit on a property purchase or paying your French mortgage, there are three main ways of transferring money to France—a spot contract, a market contract, or a forward contract. Let’s take a look at each one and how they work.
A spot contract is the simplest way to exchange money for Euros. This is an ‘on the spot’ transaction, where you agreed to the current rate of currency exchange and any transfer fees, and the purchase is made then and there. This is the best way to take advantage of a favourable exchange rate and it also means you know exactly how much your transaction is going to cost you.
If you already have the funds but have a flexible timeline to make your transfer, monitoring the exchange rate and using a spot contract could be a smart move. You could also set up rate tracking alerts via email or SMS to let you know when the exchange rate reaches the desired level.
How to do it: Once you have your foreign currency account set up, it’s as easy as logging into your account or App. You have 24/7 access to your funds so you can arrange a transfer of up to £100,000 or US$100,000 online at any time. For amounts over this or if you need additional advice on your transfer, you can call up and arrange your spot contract over the phone. An online money transfer will typically take 2-3 working days to clear.
If you know you want to benefit from a spot contract when rates shift in your favour, it’s a good idea to transfer the necessary funds into your foreign currency account so they are ready to go. While some banks can make the transfer within two hours, others can take up to two days to clear, so be aware of this if you want to seize the moment.
A market order allows you target a desired exchange rate and set up an automated payment conditional upon that rate being reached. Essentially, it’s the same as tracking the exchange rate yourself and then making the transfer using a spot contract, but takes all the hassle out of watching rates and setting up the transfer.
If you know the rate you’re after and have the funds ready to go, this is the most convenient and fool-proof way to ensure you don’t miss out. With the FX market trading 24 hours a day, 5 days a week, this means you won’t miss your chance even if exchange rates shift overnight or you’re not available to make your transfer.
How to do it: Market orders need to be set up over the phone with a currency specialist. You choose the amount of the transfer and the desired exchange rate in advance, and transfer the funds into your currency account.
There are three options to choose from. A limit order is ideal when there is an upward trend in currency. You set the exchange rate to the desired amount and the transfer is made once the rate is reached. A stop-loss order provides extra security if rates look like they may fall below a certain rate, ensuring you make your transfer before any losses occur. There’s also an OCO order (or One-Cancels-the-Other order), which combines the two to offer both the security of a stop-loss and the desired rate of a limit order.
Which one to choose depends on a number of factors, including current market trends and your timeline for making the transfer. It’s highly recommended to seek the advice of your currency specialist in order to choose the right order for you.
Forward contracts allow you to fix the exchange rate at the time of taking out the contract without having to transfer the full amount at that moment. Rates can be fixed for a period of up to two years.
There are two main reasons this can be useful:
- To take advantage of a favourable rate on a large transfer, either because rates hit a historic high, or because you are worried about a downward trend. If you don’t have the funds immediately available for a spot contract, a forward contract could be the next best thing.
- To be certain of the amount of your domestic currency that you will pay for your Euro purchase. A forward contract can be ordered on a one-off transaction or set up as part of a regular payment plan. Perhaps you have a strict budget for a property purchase and want to lock in your funds, or perhaps to be certain over the payment amounts leaving your account each month.
A forward contract is a smart choice for property buyers once you’ve had an offer accepted. You may still be waiting on funds to clear, but don’t want to risk the exchange rate shifting and your property suddenly costing you more than predicted. Even if there is a chance the exchange rate could move in your favour, it’s reassuring to know exactly how much your property is going to cost on the day you sign the Compromis de Vente. You probably wouldn’t be willing to purchase a property in your own country without knowing the exact price, so why would you risk it on your French property?
However, don’t rush to use a forward contract if there’s not a good reason to. Remember that you will be locked into this exchange rate whether it moves in the right direction or not! It’s a good idea to seek the advice of your currency advisor before committing.
How to do it:
To secure a forward contract, you’ll need to put down a deposit—typically between 5-10% of the full transfer amount. A forward contract can be arranged over the phone with a currency specialist and you’ll decide upon the transfer amount, duration of the contract, and deposit amount.
If you have monthly payments or transfers to make, you might want to look at setting up a regular payment plan with your forward contract.
Transferring Money to France?
Whether you’re searching for your dream French property or planning a move to France, it’s never too early to start thinking about currency exchange. Read our Beginner’s Guide to Currency Exchange, visit our Currency Zone for the latest news and currency reports, and use our French Currency Exchange checklist to ensure you are fully prepared for your French property purchase.
FrenchEntrée’s trusted partners at Moneycorp have more than 40 years’ experience helping customers get the best value on their international transfers. Best of all, if you sign up through FrenchEntrée, you can benefit from our exclusive offer including free international money transfers for life.
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