Dealing with currency in Spain

Spanish Mortgages

For those looking to purchase a property outside the United Kingdom, Spain is still a firm favourite. A huge volume of holidaymakers head for Spain every year and it is generally considered to be a safe and well-trodden route.

Dealing with Currency

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Introduction to Currency Issues
One of the main factors that many overseas property purchasers overlook is the issue of currency fluctuations. If a mortgage is obtained in euros from a Spanish bank, yet you finance this from sterling income, then not only are you potentially gambling on the currency exchange market but also on the property market.

Currency fluctuation could mean that your excellent property purchase becomes a losing investment, so beware and make sure you understand the implications.

Understanding Currency Issues s
A euro-based mortgage is quite simply a requirement to pay euros back in the future at a specific interest rate. For most foreign purchasers, they will have to buy euros in order to purchase a Spanish property. This means that on any given day, the actual price of the property will vary with the currency fluctuation, as it is the sterling price that is important to the UK purchaser.

Not only will the actual purchase price of the property vary on a daily basis with the currency fluctuations, but any income that is generated from the property is also likely to be in euros. Consequently, income may also fluctuate on a daily basis, making investment calculations particularly difficult to predict and to rely upon.

Making the Most of Currency Fluctuations
Currency changes do not necessarily mean difficulties for the foreign investor and can actually offer a larger profit, if played correctly. By waiting for a favourable exchange rate, the purchase or sale of a property can be made considerably more profitable, just by moving completion day by one or two days either way.

Minimising Currency Fluctuations
If dealing with currency fluctuations seems like too much of a risk for your property purchase, then it is important to look for ways to minimise the fluctuations. A great way of doing this is to open a euro-denominated account that can be used to deal with all the income and outgoings for the property. In this way, you can select the date of transfer to suit yourself and not necessarily when the cash comes in.

Of course, the other option is to ensure that everything remains in sterling denomination by obtaining an international mortgage and requesting payments in sterling. It will still not be fully possible to avoid euros as there will inevitably be bills that have to be paid in the local currency.

Summary
Bullet Point When purchasing a property in Spain, it is vital that you consider the issues of currency fluctuation;
Bullet Point by having a mortgage in local currency you may gain or lose, depending on the rate of exchange between local and home currencies; and
Bullet Point it is important either to control this exposure and to make the most of the fluctuations or to minimise by maintaining a local currency account to deal with regular outgoings and income.

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