Financing your Turkish Home – Currency Exchange
So, you have found the Turkish property you want to buy. Your agent or developer will begin to draw up contracts, and you’ll need to think about how you are going to finance the property and send funds across to Turkey. Initially this will be for the holding deposit, and then the balance of the purchase price.
You may or may not be taking out a mortgage to buy the property. If you are a cash buyer, ensuring you get the best currency rate will be even more important if you are exchanging currencies in order to buy.
Currency Exchange – The Basics
If you haven’t heard of it before, the ‘Foreign Exchange Market’ (often referred to as ‘FX’ for short) is a global market for pairing up and trading currency. For every currency trade you are essentially selling one currency and buying in another. Specialist currency brokers offer a number of different mechanisms – some simple, others much more complex – depending on the clients requirements. In our experience the three main ‘trades’ to be aware of are:
Spot Trade: This is where you exchange your currency on a particular day and time and pay the rate ‘on the spot.
Forward Trade: If you want to only buy or sell at a particular rate – common if there is fluctuation in the rates of the currencies which concern you – you can pay a fee to ‘lock-in’ a particular rate. Then, regardless of whether the rate goes up or down, you pay your agreed rate for the currency at a later date.
Limit Order: You can specify to your currency broker that you only want to exchange the currency if and when certain conditions are met, usually a minimum level for one or both of the currencies.
The currency brokers make their money by factoring in a small profit margin on the trade, and there may also be fees. These vary depending upon the organisation you are using. At all times the currency broker must be transparent about fees and costs.
How do I send currency overseas?
You have a number of options, starting with your usual/local bank and approaching them to see what their rates and fees are. As for some banks it might be a small part of their portfolio, you may find the rates are not overly competitive compared to specialist firms who trade currency day-in, day-out, at huge volumes. But it’s always worth asking the question!
The currency market is hugely competitive. It pays to shop around. There are lots of different options, rates and solutions. Money can be moved online – even via a mobile app – and mechanisms such as fixing a ‘forward contract’ can be useful if you want to protect against currency fluctuations.
The more expensive the property you are buying, or the larger the sums you will be converting, the more you can benefit from the best exchange rate. It may seem trivial but it is worth spending a little time understanding your options.
Why use a currency broker?
Generally, you are likely to get a better rate if you exchange your funds via a currency broker. Banks can charge anywhere between 2% and 4% more than specialist brokers. This is due to the volume differential mentioned above and economies of scale. In that sense it would arguably make sense to use a larger, more established currency broker than a smaller company, but you never know – the small broker may offer you a deal om fees you can’t turn down!
There are many different currency brokers; it is a highly-competitive market. All of their services will be broadly similar. We find that for many of our clients the decision as to who to go with is often down to the 1:1 relationship they have made with a broker, and whether they feel their money will be in safe hands – even if the rate is not the lowest.
Even before you have found the property you want to buy, it is a good idea to speak to a couple of brokers and decide on one or two you might like to work with. When you find the property, you can move quickly because you have already done this research.
Who do we recommend?
Here at the Turkish Property Agents we have worked with a number of brokers over the years, in different countries. We now work with a select panel of brokers who have been chosen to provide a high quality, secure currency exchange solution. They will be happy to have an initial discussion (using the links below) or we can introduce you by email, brief them on your requirements and they will get in touch.
If you would like any help on this page please contact us.
Check out our Turkey Real Estate News, find exciting news and updates from Turkish Real estate market, newest properties for sale and much more.