Nov 07, 2022 / CURRENCY

Currency: How to effectively organise your ongoing and regular payments, including rental earnings

Purchasing property overseas comes with the added issue of having to pay attention to exchange rates. Even after you have purchased your new home, there will be ongoing and regular flow of money to take into consideration. It is crucial to organise your finances efficiently so that it is not negatively impacted by changes in the market.

So, you are thinking of (or already have) purchased a ski property. Perhaps, it is a beautiful little chalet in the French Pyrenees. Or a sleek and modern home in Colorado.

As swept up as you might be in the idea of skiing to your heart’s content, it is important to get organised when it comes to the financial side of things too.

In this article, whether you need to transfer money to the Pyrenees or to Colorado, we’re going to go through how to do that in an organised manner. Once you have a plan in place, you can pop your skis on, stress-free.

Understanding currency exchange

The crucial difference between owning a property overseas and in your home country is the impact currency exchange rates can have on your money.

Every day, the exchange rate experiences fluctuation, affected by political and economic events. Even the seemingly smallest change in rates can have an enormous impact on your money if you are transferring between currencies.

You will first encounter this when you purchase your ski home.

There is the potential for there to be movement in exchange rates between you reserving a property and paying for it. Unfortunately, while lawyers and notaries are doing the legal process, the exchange rate can move against you.

For example, you’re buying a €500,000 property. When you put the deposit down, you could get €1.20 to the pound, so it costs you around £416,700. But, by the time you’re ready to complete the purchase, the rate changes to €1.15 to the pound. This means that your property now costs you £434,800. You will need to find another £18,000, and if you are unable to come up with that difference, you may lose the property and your deposit.

A solution to this is a Forward Contract. With a Forward Contract, you lock in an exchange rate, with no further fees, for up to twelve months. This means that you retain that rate of €1.20 to the pound and if it changes to €1.15, that won’t affect what you pay.

Find out how to protect your property-buying budget with Smart Currency Exchange

The interior of a ski chalet in St Martin De Belleville, France

Ongoing and regular payments

Having to be concerned with currency exchange rates doesn’t end the moment you have been handed the keys to your ski chalet.

There are plenty of reasons why you will still need to send regular payments overseas. You will have maintenance costs, utility bills and local taxes to pay.

You may have retired to your new ski home, for a post-work life of cross-country skiing and dinners in breath-taking settings. If that’s you, then you may be dependent on a pension or investment income from abroad. You don’t want exchange rates to negatively impact the money you receive each month.

Alternatively, you may be renting out your ski property. If you are doing this, then your rental earnings will be impacted by changing currency rates. Changes could see your rental earnings shrink as they come into your bank account in your home country.

A bedroom in a property in Aspen Mountain, Colorado

So, what’s the solution?

If you are making the same international transfers each month or quarter, then the most efficient way to organise them is with a Regular Payment Plan. This is offered by Smart Currency Exchange.

It enables you to automate the transfer process. By scheduling payments, you save money, time, and trouble.

But that’s not all.

If you set up a Regular Payment Plan with a Forward Contract, then your transfers will be at the same exchange rate every time. So, a significant loss in the value of the currency where your pension is based won’t cause you worry abroad. This is because you will have locked in the exchange rate. For the year ahead, no matter how much the markets are moving, your rental earnings will stay the same. Your rental earnings will not be at the mercy of the markets. Instead, your rental earnings will be knowable and predictable. This will be invaluable for planning and budgeting.

Now you have your Regular Payment Plan combined with a Forward Contract in place, you can put your skis on, stress-free.

Find out how to protect your property-buying budget with Smart Currency Exchange

Exterior of a ski chalet in Steamboat, Colorado

For more information on how to protect your money from shifting currency rates listen to our podcast with Smart Currency Exchange where we discuss  the role of international payment specialists, why there is a risk with exchanging currencies when buying a property abroad, some recent examples of large exchange rate movements, forward contracts and who can benefit, and currency volatility.

To get the process of buying your ski property underway, why not take a look at our handy ski property buying guides? They lay out the buying journey step by step to make the process as smooth and hassle-free as possible.