News: Forward contracts explained, fixing the cost of Costa Blanca property

Forward contracts explained, fixing the cost of Costa Blanca property
Written by Inmo Investments - 14 Jun 2018

Using Forward Contracts to fix the cost
of property purchases in Spain

Protecting your overseas property purchase from exchange rate movements

We wrote recently about how the risk that a change in the exchange rate can drastically increase the price of a Spanish property you have agreed to buy, in the time between making your offer and making your final payment.

Over the past two years the Pound has strengthened against the Euro in the late springtime – when many of our customers view and make offers on properties – but then fallen just when people come to complete their overseas property purchase.

That´s bad news, and it can add thousands to the price that you thought you were paying. If you can't make up the shortfall in your Euro currency, you might have to pull out of the deal and lose your deposit.

Why take the risk? Just when you should be enjoying the prospect of completing on your property in Spain – choosing patio furniture, brushing up on your Spanish, taking that tapas cookery course – instead you´re fretting over exchange rates!

Forward Contracts: fixing your Spanish property purchase costs for peace of mind

It is only for those buyers who know they are going to buy, because it involves paying a 10% deposit and making a legal agreement to change the rest of your purchase currency within a year.

You then pay the rest of the money when the property sale completes, at the fixed exchange rate set when you made the contract. It really does buy you peace of mind.

Smart currency exchange: foreign currency exchange for home buyers in Spain Smart currency exchange: foreign currency exchange for home buyers in Spain

You can use a forward contract for regular payments too. Suppose you are paying for a property to be built in stages, or are having work undertaken over time, or after you move to Spain you are receiving an income from rentals, pensions or investments in British Pounds or Swedish Krona.

Those costs, or income, will vary by the minute unless you lock in an exchange rate, making responsible budgeting impossible.

By securing your regular payments exchange rate with a forward contract you know exactly what your costs or income will be for at least the next year.

Speak with us about currency exchange solutions, and find out how a forward contract might help you manage the costs of buying a Costa Blanca property. We work with Smart Currency Exchange, rated as "Excellent" on Trustpilot for money transfers and currency exchange.

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