Buying a holiday home abroad: how to manage currency risk

Buying a holiday home abroad is a major financial decision. If the property is priced in a currency other than the euro, you also need to consider the impact of exchange rate movements.

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There can be weeks, months or even years between agreeing on the purchase price and making the final payment. During that time, exchange rates can change significantly. When dealing with a large amount of money, even a small movement in the exchange rate can mean a difference of thousands of euros.

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How do you pay for a holiday home abroad?

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If you are buying a holiday home in the United States, for example, the purchase price will usually be agreed in US dollars (USD). In other countries, you may need to pay in currencies such as Turkish lira (TRY) or Thai baht (THB).

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Your euros therefore need to be converted into the currency in which you are paying for the property. For a large transaction, it is worth considering the exchange rate and timing of the payment in advance.

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Why is the exchange rate important when buying a property abroad?

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Buying a property often involves a substantial amount of money. As a result, even a relatively small change in the exchange rate can have a significant impact on the final cost in euros.

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For example, imagine you are buying a holiday home for $400,000. If the EUR/USD exchange rate moves 3% against you between agreeing the purchase price and making the payment, the purchase could cost you thousands of euros more.

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The price of the property has not changed, but the amount you need to pay in euros has.

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Can you lock in the exchange rate before paying?

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Yes. With a forward contract, you can lock in an exchange rate for a future currency payment.

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You agree on an exchange rate for a specific amount and future date. This gives you greater certainty about how many euros you will need to pay for the property.

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This can be particularly useful when the purchase price has already been agreed but the payment will take place at a later date.

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A forward contract can also be useful when the purchase price is paid in several instalments.

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Why use a specialist foreign exchange provider?

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You can of course make an international payment through your bank. However, when dealing with a large amount, it can be worth comparing your options for converting and transferring the money.

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A specialist foreign exchange provider can help with:

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• comparing exchange rates and transaction costs;
• planning a large currency transaction;
• locking in an exchange rate for a future payment;
• managing multiple currency payments.

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At HanzePay, you have a dedicated account manager who guides you through the process.

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Buying a holiday home abroad: what steps should you take?

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1. Determine the purchase price and payment date
Establish how much you need in the foreign currency and when the payment or payments are due.

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2. Consider the currency risk
The longer the period between agreeing the purchase price and making the payment, the longer you are exposed to exchange rate movements.

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3. Consider whether a forward contract is suitable
If the purchase price and payment date are sufficiently clear, you may be able to lock in the exchange rate in advance.

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4. Plan the international payment
Make sure the funds are available in time and that the payment can reach the recipient's account by the agreed deadline.

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Buying a holiday home abroad? Consider the exchange rate

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When buying a holiday home, you naturally focus on the property, location and purchase price. But if you are paying in another currency, the exchange rate can also have a significant impact on the total cost.

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Planning your currency transaction in advance and potentially locking in the exchange rate can give you greater certainty about the amount you will ultimately pay in euros.

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HanzePay specialises in international payments and foreign exchange transactions. With a dedicated account manager, you receive personal guidance when converting and transferring your money.

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Want to know what options are available for your property purchase? Get in touch with HanzePay.

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Frequently asked questions about buying a holiday home abroad

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Can I lock in the exchange rate before paying for my holiday home?

Yes. A forward contract allows you to lock in an exchange rate for a future payment. This can give you greater certainty about the amount of euros you will need.

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How much can an exchange rate change affect the cost of a property?

It depends on the purchase price and the movement in the exchange rate. With large transactions, even a relatively small exchange rate movement can result in a difference of thousands of euros.

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Can I pay for a holiday home in instalments?

Yes, depending on the agreement with the seller. If you need to make multiple payments in a foreign currency, it may be possible to plan your currency transactions around those payment dates.

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Can HanzePay help with buying a holiday home outside Europe?

Yes. HanzePay can help facilitate international payments in various currencies, including payments for properties in countries such as the United States, Turkey and Thailand.