01 Nov Exchanging your money when buying in Italy
If you are considering buying a property in Italy, at some point you will think about changing money into the agreed Euro purchase price.
Although some buyers might feel deterred by movements in currency markets, especially falls in value against the Euro, of GBP Sterling, USD, AUD, CAD or whichever other currency is your home currency, Italy continues to attract overseas buyers, regardless of what the exchange rates or local economies are doing.
Although there is a community of expatriates and foreign buyers in Italy, the constant currency of use is Euros.
Which means, once the price has been agreed, your property payments will need to be made in Euros. It’s very rare the seller (and local professionals) will accept anything else.
You might consider a foreign currency exchange plan when preparing to buy property in Italy. The first thing to realise is that you do not need an Italian bank account to make a property purchase. You can pay directly into the seller’s bank account, or the agent or Lawyer’s trust account for deposit payments.
A foreign currency exchange plan can help you better manage foreign currency cash flows and avoid unnecessary risks. The aim is to mitigate the risk of negative exchange rate movements and ensure that you stay within your budget. Even very small fluctuations in currency exchange rates can have a big impact on major purchases such as a property deposit or payment at closing time.
You may also need to make building renovations payments and repairs soon after you purchase as well, so having an exchange plan in practice could save you alot of money and stress.
In deciding your plan (and we can help with that), if you need to provide a deposit immediately, and there’s no time, you cannot be worried about the best possible exchange rates, you will need to simply use the spot rate (see below).
Some of us are more risk averse, and may prefer the reassurance of specific sums regularly leaving or arriving in your bank account, and others may be more prepared to take a risk to target the best rates at any given moment and potentially save money. The specific circumstances of your purchase will also play a part.
The three most common ways to exchange money are:
- Spot Contract or Spot rate. This is simply exchanging when the money is needed: useful if you want to make a transfer immediately, for example if you’re securing a property with a deposit. Setting up a new spot contract each time you want to make a transfer isn’t always the most efficient way to manage your money across borders, but if an urgent need arises out of the blue, it’s a valuable facility, that can be setup quickly and easily online today.
- Forward contract. This allows you to secure an agreed exchange rate in advance and reputable money-transfer companies can hold the rate for you for up to two years. Forward contracts offer peace of mind on the final value of a currency transfer for a property settlement for example, when you know the settlement date (Rogito) well in advance. They can also be useful for effective budget planning for property renovations and maintenance, as well as transferring required living expenses to Italy. Please note forward contracts may require a deposit.
- Market Order. Market orders comprise both limit orders, which allow you to target a specific beneficial exchange rate you want to achieve and stop-loss orders, which identify the worst-case rate that you want to avoid. These two often work together – a desirable rate can be targeted but if the market heads in a different direction, a stop-loss order can help to limit the damage by guaranteeing a minimum rate for the exchange.
A reputable money transfer company can provide guidance on the market, helping you decide on the right foreign currency exchange plan and explaining how the above solutions may work for you. This can certainly help to take the stress and uncertainty out of managing your foreign money transfers and reduce your overall costs when buying in Italy.
Contact us for more information and a direct, personal introduction to a money transfer expert for appropriate solutions.