Being able to fix the cost of future cross-border transfers is an invaluable tool for overseas property buyers. By forward purchasing currency the moment you commit to buying, you can protect your funds from exchange rate movements and gain peace of mind in the run-up to completion day.
The benefits of forward contracts aren’t limited to typical resale property transactions though – they are equally useful for other property-related and other international payments. Here are some of them…
Feeling a bit off-plan!
Typical off-plan purchases come with a fixed payment schedule. After an initial reservation deposit, depending on the developer a more substantial down payment, usually between 10% and 40% of the purchase price, will be requested when you sign the sales contract. The remainder of the balance will be due on completion or as stage payments during the build process, depending on the developer. Given typical construction times can vary from six months to two years, there is plenty of opportunity for the exchange rate to swing significantly between the contract stage and getting the keys to your new home. Forward contracts will enable you to fix the cost of each payment well in advance and avoid nasty surprises.
Renovation game
Not unlike off-plan, a serious doer-upper project is usually done in stages, each one requiring a payment to your contractor. Work out when and what you’ll need to pay and use forward contracts to keep control of your spending. Renovations can be stressful and often go over budget wherever they are, so don’t make things worse by leaving yourself exposed to painful changes in the exchange rate. Apply the same rules to any type of phased construction work, such as having a swimming pool built or converting an outbuilding.
Emigration & repatriation
Ask any financial advisor and they’ll tell you that planning is critical to a successful move abroad. The same applies when you give up being an expat and make a permanent move back to the UK. Give serious thought to when and for what purpose you’ll need to start transferring funds across borders before you board any plane. For example, you’ll need funds in a foreign bank account to cover immediate living expenses. You might be leaving funds in the UK for transferring at a later date, perhaps to buy a property – a forward contract could be useful for this. Likewise, you might want to consider forward buying currency when you come to transfer the proceeds from sterling-based investments or the sale of a business in the UK. At Smart Currency Exchange, we’ll happily help to formulate a plan.
Regular income payments
Most expats receive income of some sort from the UK or other overseas territories. This could be monthly pension payments, either state and/or private, rental income, or income from a business. If you’re a digital nomad, chances are you’ll be receiving your monthly wage in a different currency to your new local one. In all of these instances, to help you budget your monthly living costs, consider combining Smart Currency Exchange’s regular payment plan with a forward contract.
Paying inheritance
When owners of holiday homes or expatriates pass away, it’s not unusual for their overseas property to be sold and the proceeds left to family (or friends) back in the UK. Likewise, overseas expats often inherit property in the UK. In these scenarios, Smart Currency Exchange will assist with transferring any funds and setting up forward contracts if required.
Buying a yacht
While this luxury right not be on everyone’s radar, the process of buying a high-ticket yacht on foreign shores is similar to buying an overseas property. You do it through an agent or buy direct, you’ll sign a reservation contract, pay a deposit, get a survey done (for a second-hand one) and agree on a date for signing the final sales contract. Throughout this process, the exchange rate will be moving – cue a forward contract, so you know what your final costs are from the get-go.
Education, education, education!
For expats with children at private schools or universities in the UK (or any other foreign country), forward contracts are a useful tool for budgeting for those painful fees. The same applies to anyone living in the UK but paying for someone’s education or training of any sort abroad, including their own. It’s not unusual to travel overseas to complete a training course, whether professional or vocational. Smart Currency Exchange helped Bob Bright, transfer dollars to the US when he spent long periods in Florida learning to fly. Getting your pilot’s licence is cheaper and more enjoyable – thanks largely to the conditions – than in the UK.
Medical treatment
Medical tourism is the modern term for travelling abroad to receive healthcare treatment – usually because it is cheaper than in your home country. If you’re planning on having an expensive procedure in a foreign country and need complete control of the costs, consider using a forward contract for your foreign transfer.
Here comes the bride…
Got a wedding in a foreign country to cover, either your own or one of your children’s? Don’t let a sudden hike in the bill leave a bad taste in your mouth – it’ll ruin the champagne and only show in the photos… The weather on the big day is down to the gods, but you can control the costs of your currency transfers with a forward contract.
