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Currency Exchange when buying property in Spain
What should you take into account regarding currency exchange when buying a property in Spain?
There are several good reasons to use a specialist company for your currency exchange when buying property in Spain, rather than your bank. Nearly everyone who has ever made a cross—border, inter-currency transfer will be familiar with three of the most exasperating factors: the time it takes for the money to arrive, the fees associated with the transfer, and the exchange rate given by the bank. Whilst efforts are being made in European banking to speed up the transfer time, there appears to be no changes afoot anywhere when it comes to bank exchange rates, hence the need for a specialist service.
Speeding up bank transfers in the Eurozone
Many buyers of property in Spain and living in the Eurozone are familiar with the time delays associated with making cross-border transfers. However, there is good news for overseas buyers transferring money to Spain and other parts of the Eurozone, because now you can transfer up to €15,000 online – in seconds! On 14 th February 2018, a new system went live in the Eurozone, which hopefully stops the annoying time lag in money arriving at its destination. According to press reports customers in the Eurozone should be able to makes transfers up to the limit mentioned above within 10 seconds.
A number of Spanish banks are already using the system. They are: Santander, BBVA, Sabadell, Bankia, Caixa and Albanco. Bankinter may also adopt it, although it already has the Bizum system that performs transactions in record time. One concern for the banks, or rather for bank customers, is regarding the charges for the service. It is believed these will be around 20 to 50 cents per transaction, although some banking analysts believe that the service will ultimately be free.
Banks offer the worst exchange rates
But, while this all sounds like great news if you’re transferring money to buy a property in Spain within the Eurozone, there is still the cost of using a bank to make a substantial transfer to consider, and more to the point, a punishing rate of exchange, if day you are sending sterling to Spain for a purchase in Euros. At this link there are some examples of various currency exchange rates and a starting illustration of what a buyer receives if they use a British high street bank to transfer £10,000 to Euros, compared with a currency exchange specialist. Bank – €10,755 Currency Exchange – €11,304 The saving for the buyer is €549 simply by using a currency exchange.
If you would like to know more about how international exchange rates are set, this Investopedia article explains it all, and it is helpful for analysing your home currency in relation to the Euro when you are buying a property in Spain.
Banks charge above the inter-bank rate
When you’re sending money to a country operating in another currency, the banks use the inter-bank exchange rate. This is the rate used by banks to pay each other. However, as a bank customer, they put a fee on top of this, but the customer is never told about this; the customer is just told the rate of exchange. Currency exchanges on the other hand have a very different way of working. Transferwise, for example, which is one of the more popular services in currency exchange, charges a fixed fee regardless of the amount of money being transferred and it is completely transparent about it. The peer-to-peer (P2P) system used by Transferwise avoids the banks’ system, because the money is transferred at the real exchange rate and users only pay a fair, upfront fee. It is a fairly unique model in that no money is ever actually transferred. The Telegraph explained the neatness of the system: “If you want to send Euros from the UK, for example, you are matched with someone with a euro account who wants to send the same amount in pounds, and the money goes from their account to the destination account in Euros, avoiding moving money across borders.”
Bank commissions on international currency transfers
In addition to the banks hiding costs in the actual exchange rate they give the customer, there is also the cost of making the transfer, which varies from bank to bank. For example, in Spain, bank commissions on international transfers vary from 0.35% for a transfer in Euros within the EU, to 0.80% for a transfer exceeding €50,000 to a currency that is not the Euro and is outside the EU. How British buyers will be affected post-Brexit is not yet known. And, according to another source, if you’re buying a property for say €200,000, the fee can be as much as 13% of the money transferred.
How do currency exchange specialists give better rates?
Using Transferwise as one example, its system uses the mid-market exchange rate, which is the mid-point between the buy and sell rates on the global currency market and the rates used by Reuters and Google. It is completely different to the inter-bank rate!
It is undoubtedly worthwhile consulting a currency exchange specialist if you’re planning a purchase in Euros, because they can advise you on getting the best rate for large transfers, especially if you need to transfer a sum in excess of €15,000.
British buyers in particular, given the fluctuating value of the pound, are certainly advised to turn to currency exchange specialists, and find out how to buy Euros with GBP at the best possible rate, rather than the rate on the day of the transfer. For example, by using a specialist currency firm, you have an opportunity to fix your exchange rate for up to two years from now and that is potentially equivalent to saving £12,000 on a €200,000 property.
Moneycorp offers iFindSpain clients personal currency exchange service
Overseas buyers of property in Spain have the benefit of iFindSpain’s partnership with Moneycorp.
Moneycorp has been operating international transfers since 1979. Not only does it offer better exchange rates than the banks, it also offers fast online transfers 24/7. It will also save you money if you need to make regular transfers to pay the mortgage on an overseas property and its experts are available to chat with you about your specific needs and advise you on the most cost-effective way of managing your money, including the repatriation of funds for property owners who wish to sell and return home. You can register with the service in a few minutes without any obligation to use the service.
Contact us for help and advice from our foreign currency exchange specialists when you’re buying a property in Spain and save thousands of pounds and Euros by using a smarter exchange solution.
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