Cash buy of a house, but I need to pay in Euro

Henry123

I live in the North of Ireland and want to buy a holiday home in Southern Ireland. Its a cash purchase but I'm not sure how to get the best currency conversion in the house buying process. I've worked out that there can be a difference of up to £5k ...yikes!. Please help

abankerbutnotafatcat

Approach your bank and ask them to quote a rate - they can fix the exchange rate for you and the larger the amount involved the finer (i.e. the less profit for the bank and better rate for you) that rate should be. This can be done for any future date i.e. exchange date. Ensure (on the presumption that this is involving a sum in excess of £50k) that you get a 'corporate' rate i.e. one where they actually approach their dealers for a rate rather than provide the rates used for holiday cash. You are free to use any financial organisation that you like and will get better rates by shopping around but your current bank will obviously be easiest (as that's where the cash is sat presumably) and a good place to start. If you choose a non-bank FX institution like HIFX (who I have used to great satisfaction in the past and no I don't work for them) check they are regulated and if not your money is at risk for the time they are holding it although if that isn't for long then your risk isn't much. You would need to get your payment to them by CHAPS (automated payment) for a cost of £25ish and (they'll forward it in currency) but you'd need to send your payment electronically for a fee anyway and the cost savings should outweigh this.

Depending on the timescales involved you could also open a Euro account with your bank and transfer your GBP in to it on a day favourable to you (i.e. when GBP is 'stronger' vs the Euro). Close the account once used as they'll probably charge you for it.

Note if you do send the payment directly to Ireland that there is now a flat low cost method of making electronic payments within the EU on a next day basis as long as the payment is both sent and received in Euros - it's about £10 but i'm not a branch banker so your bank will know more about this than me. HTH

Henry123

Really appreciate this informative response I will discuss a fixed rate with my bank, at least that way I know what the conversion is when I make my bid. You are so right, any electronic transfer fees will significantly outweigh what I might get in currency conversion on the day. When I first looked into this, it felt like a gambling on conversion rates. Thanks again!

Nukumai

Henry123 wrote: »

When I first looked into this, it felt like a gambling on conversion rates. Thanks again!

Be sure to remember that the primary advantage of having your bank agree to do a forward fx transaction for you is certainty - specifically, that you will know in advance exactly what your euros will cost you at a future date, irrespective of what the actual market rate on the day happens to be.

You are effectively willing to forgo the potential for a better rate in the future, by accepting a known/guaranteed rate now. Which is, in my opinion, the correct course of action for you to adopt.

If you find a bank that is happy to do this for you (and there is no reason why not, other than it being a small transaction-size), you will need to deposit your pounds with them up front. And, as most forward fx is commercial, be sure to understand any additional fees that they might be looking to charge you as a retail customer.

silvercar

If you find a bank that is happy to do this for you (and there is no reason why not, other than it being a small transaction-size), you will need to deposit your pounds with them up front

You can get a forward exchange contract if you don't have the money available at the moment.

There was a long thread on the best euro rates on the "anything else" board.

LocalLad

Have you considered buying in Portrush?

Nukumai

silvercar wrote: »

You can get a forward exchange contract if you don't have the money available at the moment.

If you are not asked - as a retail customer - to deposit funds up front, the bank is extending you credit (which amounts to the same thing as they are, effectively, lending you funds).

As an example, here is HSBC's general terms for forward fx :

http://www.hsbcnet.com/treasury/foreign-exchange/fx_spot_forward_contracts.html

The relevant part is :

Key facts
Minimum deal size: No minimum
Maximum deal size: No maximum
Period: Usually any period to two years - longer periods are available in certain currencies
Credit line: A credit line is required for forward contracts
Currency pairs: Any freely convertible currency pair

DVardysShadow

abankerbutnotafatcat wrote: »

Approach your bank and ask them to quote a rate - they can fix the exchange rate for you and the larger the amount involved the finer (i.e. the less profit for the bank and better rate for you) that rate should be. This can be done for any future date i.e. exchange date. Ensure (on the presumption that this is involving a sum in excess of £50k) that you get a 'corporate' rate i.e. one where they actually approach their dealers for a rate rather than provide the rates used for holiday cash.

Question: If you do this, are you buying an option to convert currency in future, or are you buying a definite conversion which you cannot back out of?

abankerbutnotafatcat

I was suggesting a forward fix - he definitely wants the euros on a specific future rate. As Nukumai says, this is the path if OP is after certainty of how much the transaction will cost him rather than looking to make a profit from currency movements. Of course he'll still be after the most favourable rate environment.

Nukumai

DVardysShadow wrote: »

Question: If you do this, are you buying an option to convert currency in future, or are you buying a definite conversion which you cannot back out of?

The latter.

Having said this, a forward contract can be broken if he bank agrees - with any attendant costs being borne by the customer.