Individuals purchasing their dream second home including overseas property and real estate investors are getting ripped off when making and receiving international payments. Lucky, the process of sending money abroad doesn’t have to be an over complicated headache; at least not with these 5 currency tips. Today, we invite currency expert Daniel Abrahams, whose international money transfer comparison platform last year helped over 600,000 visitors find a fairer and more transparent currency deal.
Currency Tip #1: Watch out for the ‘hidden’ fee
All foreign exchange companies and banks make money in exactly the same way. Within each international money transfer transaction there is a ‘‘transaction fee’’ and more importantly, a ‘‘foreign exchange markup’’ which is added to the real rate of exchange. When paying for an overseas property, look closely at the markup being applied, as this is the strongest indicator on whether or not you have received a competitive foreign exchange deal. The closer the rate offered is to the interbank (or real) rate, the better the deal.
Top Tip: Ignore gimmicky slogans of ‘we offer 0% commission’’ as this is usually done to mask a poor rate of exchange. 0% commission doesn’t help if you are being quoted margins of 5% away from the interbank exchange rate.
Currency Tip #2: Consider a non-bank currency broker
Currency brokers, as opposed to banks, are specialists in helping customers move money internationally. Every year, our independent research shows an increasing percentage of real estate buyers using non-bank foreign exchange specialists. These specialist providers typically add competitive markups of inside 1% of the value of your international money transfers. Their main USP is the ability to offer a ‘private banking’ style service to the everyday individual or real estate investor.
Unlike banks, you will transact through a dedicated account manager who will help you manage your overseas real estate transaction, to ensure you make an international money transfer at exactly the right time.
Currency Tip #3: Safety and security of funds
When transferring money abroad with a non-bank foreign exchange specialist, ask some key questions. First, ensure the chosen currency broker is authorized and regulated as a money service business. Second, ask whether they operate segregated client accounts. These are separate from the day-to-day running of the business & ensure your funds are protected, should the currency broker fall into any financial difficulty.
Top Tip: Only transact with a currency broker who has a proven track record of at least 5 years in business. The MyCurrencyTransfer comparison platform independently vets the international authorization (e.g. FCA, FinCEN, FinTrac) of each currency company listed.
Currency Tip #4: Hedge your currency risk via forward contracts
Consider the use of a forward contract when making overseas payments for the purpose of a real estate transaction. This type of money transfer allows you to fix an exchange rate for up to two years in advance. If you have a budget that needs sticking to, these become an excellent way to mitigate against the risk of adverse currency fluctuations. It’s well worth speaking to your chosen currency broker well in advance.
Currency Tip #5: Shop for a better deal
Lastly, don’t settle for the first deal you stumble across. Shop around for a better deal and don’t be afraid to haggle with your currency broker or bank. You would be amazed at the lengths these companies would go to win your business.
About the Author: Daniel Abrahams is the Co-Founder of award winning foreign exchange comparison website, MyCurrencyTransfer. Last year, the site helped over 600,000 overseas property buyers, sellers and businesses find a fairer and cheaper deal on currency.