Imagine this: You’ve just made an offer on your dream home in France, and it’s been accepted – hurray! However, did you know that when buying in a foreign currency, your exchange rate continues to fluctuate even after the offer has been accepted by the seller?
That means, that while the price in euros has been agreed, the price in your home currency continues to move with the currency markets which are influenced by a range of factors including economic data, political news and stock movements.
However, there is a currency tool designed to help you lock-in your exchange rate. It’s called a forward contract and is offered by currency specialists like our partners at Smart Currency Exchange.
What is a currency forward contract?
The forward contract, an often-underutilised tool, is essentially an agreement to buy or sell a certain amount of foreign currency at a predetermined rate, on a set date in the future. It's akin to locking in the exchange rate today for a transaction you plan to make tomorrow. This tool is invaluable for those buying property abroad as it provides a hedge against the risk of exchange rate movements, which can be quite volatile and impact the total cost of your purchase significantly.
What are the benefits of using a forward contract?
The benefits of using a forward contract are tenfold. Firstly, it provides certainty. Knowing exactly how much your foreign currency will cost in pounds helps with budgeting and financial planning, ensuring that the cost of your property does not escalate due to adverse currency movements. Secondly, it offers protection.
With a forward contract, you're shielded from any unfavourable shifts in the market, which can be particularly reassuring in times of political and economic uncertainty. Lastly, it affords flexibility. While the rate is fixed, you often have the option to draw down some or all the funds before your completion date, should your plans change.
Essentially, a forward contract protects you from the unpredictable currency market turning against you, which could, in effect, cause your property to cost thousands more. It’s not uncommon for rates to move between 5-10% in a three-month period, the average time it takes to complete legal due diligence in France. It’s worth noting, that if the currency market moves in your favour, those with a forward contract will be unable to benefit, however without one, you’re essentially gambling with your property budget.
How to secure a forward contract?
With Smart Currency Exchange, the process is straightforward. If you’re not already registered, you’ll fill out a short form about your requirements and be assigned a dedicated account manager who’ll be your touch point for any future currency requirements.
You will be able to discuss your currency needs with a specialist who can provide guidance on the best strategies for your situation. Once you decide to proceed, you'll agree on the amount of currency and the rate to be locked in. A small deposit is typically required to secure the contract, with the balance due on the agreed future date.
Why choose Smart Currency?
Smart Currency Exchange prides itself on offering competitive rates and personalised service. They have 20 years of experience assisting overseas buyers secure international real estate and their experts understands the nuances of foreign property purchases. Plus, they work closely with their clients to navigate the complexities of currency exchange, which can be a little confusing to those who only dabble in foreign exchange for a family getaway.
By choosing Smart Currency, you're not just getting a financial service; you're gaining a partner who is invested in making your transition to a new life in France as smooth and cost-effective as possible.
With a currency specialist like Smart Currency Exchange on your side, you can focus on the excitement of starting a new chapter in life, with one less financial worry on your mind.
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