Using a Forward Contract to Purchase a Property Overseas

Scenario

On 25th September 2013 Mr & Mrs Sherwood had found their dream holiday home in Italy agreeing to a price of €300,000 Euros. To secure the property a 10% Euro deposit was required within 14 days. After speaking to friends who had previously purchased a holiday home, Mr and Mrs Sherwood decided to use the internet to search for a currency specialist that would provide a better rate than the poor one being offered by their own bank.

After carrying out a Google search they came across our comparison site which displayed all of the leading UK foreign exchange brokers in one place with a breakdown on everything from exchange rates, transfer fees and payment methods. All the information around cost and range of services allowed them to choose the most suitable company to use. Mr and Mrs Sherwood were also put at ease knowing they were only comparing the safest companies to use with the best track record in the industry.

After completing their research briefly on our site they decided on World First and on 27th September 2013 fixed an exchange rate using a spot contract to buy €30,000 Euros (the 10%); at a rate of 1.1825 costing £25,370.

The couple knew the remaining 90% of the property purchase (€270,000) was not required until late October 2013 and felt there was no rush to purchase the remaining amount of Euros. However after discussing their payment timescales and available options with World First it was decided that a forward contract would be the most sensible way of avoiding getting caught out by risky foreign exchange fluctuations and a more costly purchase.

On October 1st 2013 they booked an additional foreign exchange deal to purchase €270,000 Euros at 1.1905 costing £226,800. The process was simple and securing an exchange rate only required a 10% deposit of £22,680 upfront. This was followed by the final payment of £204,120 on October 25th ready to send the remaining Euros to Italy.

Buying 270,000 Euros at real time rates will cost the following amount:

All our rates are updated every 5 minutes to ensure we provide accurate comparisons.

Outcome

The decision to buy their Euros on a forward contract rather than leaving it to the last minute was the right one. Not only did it remove all the uncertainty and “sleepless nights” over what the exchange rate might do but the pound actually dropped to 1.1630 by the 25th October, resulting in a significant saving of £5,358 in less than a month. It can be daunting using an alternative to the comfort of your bank and find the best company online which is why we have built currencytoday.co.uk to help match you with the most dedicated currency specialist available.