If you are looking to buy in France you will most likely have to pay for the property in Euros. And if your funds are in a different currency, the rate at which you will exchange the funds will determine how much you end up paying for that property.
Usually there are a couple of months in between finding a property, signing the purchase contract and finally completing before the Notaire. The exchange rate that you checked when you found the property and agreed that price might have varied substantially at the time of completion. This could mean that the price you agreed is not the price you end up paying.
So should you exchange your funds?
The answer will depend on your budget and of course on the market. However there are a couple of things that could help you on your decision:
Find your comfort zone
The exchange rates are constantly fluctuating. Sometimes these movements are quick and unpredicted making your decision even harder.
Rather than only asking, what is a good rate of exchange? You should ask yourself what is a good rate of exchange for me?
Looking at your budget, your timeline and the market will help you finding the answer or rather a bracket where you feel comfortable to trade.
You have agreed a price for the property, what was the exchange rate at that time? Take that rate as a reference.
How low can you afford for the rate to fall? Take that level as your bottom line, an indication of the lowest rate you can afford. Below that rate your property becomes too costly.
Look at the market, and if there is a chance that the rate might improve, try to aim for that rate.
So let’s see this with an example:
Mr &Mrs Smith find a property to buy in the Languedoc area and agreed a purchase price of €244,200. The exchange rate at the time of agreeing the price is 1.11 so they calculate that the property will cost them £220,000 which is slightly below their total budget of £225,000. Their budget helps them calculate their bottom rate. That rate in the case of Mr &Mrs Smith is around 1.09. If they exchange their funds below 1.09 they will go over their planned budget.
However they are familiar with the current market as they have got some guidance since the beginning of the process and it looks as the rate is likely to improve. They are positive and think that they could access a higher rate, they aim for 1.13. That would maximise their budget as the property would cost them around £216,000, nearly £10,000 below their original plans.
Mr & Mrs Smith have found their comfort zone between 1.09 and 1.13. They know if they can trade between 1.11 (rate at the time of agreeing the price) and 1.13 (ideal rate) they are winning. But they also know that they cannot go below 1.09.
This exercise is good not only to understand the impact of the rates on your budget but also to be ready to identify a good rate and a good moment for you to exchange your funds.
Get some expert guidance
You are not alone. You should always seek expert guidance to help you with your decision. A foreign exchange specialist –such as moneycorp- will do that and will do it with no extra cost.
They are used to work with property buyers from the earlier stages to help them get familiar with the rates and knowing their options with the purpose to protect or even maximise their budget.
In fact, one of the benefits of using a specialist such as moneycorp is not only the access to competitive rates but also the ability to access some currency tools to help you planning your transfer, so for instance you can lock the rate of exchange in advance –up to two years- via a forward contract or track a rate via a market order.
Opening an account with moneycprp doesn’t involve any cost or obligation but will give you access to some expert guidance that will help you planning your transfer. Plus with FrenchEntrée you can enjoy free transfer fees in all your payments to France.
With a Platinum Trusted Service Award 2020 from independent review site Feefo and 40 years of experience in the industry, FrenchEntree has been recommending moneycorp for more than 15 years. During this time they have helped thousands of client planning the best way to pay for their property as well as supporting them afterwards with any further payment from paying bills, mortgages to repatriating UK pension payments for those who have retired to France.
Furthermore, we have worked with the same person at moneycorp for more than a decade! You might be familiar with her as she often writes for our FrenchEntree magazine. She has 13 years’ experience in foreign exchange, and is a qualified European lawyer with experience in European transactions. Mar will be happy to answer any questions or enquiries to support you through these difficult times
Opening an account is really easy and free of cost. You can register online or over the phone in a couple of minutes and for FrenchEntree there are no transfer fees in any payment.
Open a free account today by clicking here.
Contact moneycorp at 020 3773 6355 or send your enquires here.