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How to Save Money When Purchasing a Retirement Home Overseas

Understand how you can save the most money on your currency exchange before you transfer your hard-earned money overseas.

By Kelly Cutchin

Purchasing a retirement home overseas can seem like a dream for those imagining a life abroad. But setting yourself up for retirement comes with many challenges, and adding in the international aspects makes it even more difficult.

In 2006 Kelly joined the Moneycorp Team based out of their Orlando Florida Office and has since then held various positions within the Moneycorp group. In December 2012, she took on the role of Country Manager for Moneycorp's USA operations where she leads a team of foreign exchange experts who work very closely with their global offices. Educating professionals on the importance of understanding the foreign exchange market and helping Realtors promote their businesses internationally are a few of Kelly’s initiatives and passions. Learn more about Kelly and her team by visiting Moneycorp Americas here.

Kelly Cutchin

With so many things to consider, it’s easy to get lost in the shuffle. Whether you're investing in overseas real estate for the extra income once retired or purchasing your new full-time home, it’s essential that you understand how you can save the most money on your currency exchange before you transfer your hard-earned money overseas.

Should You Use Your Bank?

Before you make any commitments, research all of your available options when it comes to transferring large amounts of money internationally. While you can transfer overseas funds with your bank, doing so is often the most expensive option due to poor exchange rates and hidden fees.

An alternative option to the traditional bank route would be to use a foreign exchange and international payments provider. Unlike banks, these providers often have little to no fees and offer exceptionally better exchange rates.

If you decide to work with an international payments provider, selecting the one with the best exchange rate, and one that offers flexibility with your payments is often the way to go. At first glance, slight differences in exchange rate offerings may not seem like a big deal but when you're transferring funds upwards of $100,000, even slight variances can have a huge impact on the price you ultimately pay.

Quick Tips for Purchasing Property Abroad

Now that you've done your due diligence researching the various ways to effectively fund your overseas retirement purchase, you should take some time to understand the regulations, practices, and implications of actually going through with that investment.

  • Understand Local Real Estate 

When purchasing property abroad many people fail to take into consideration how different real estate practices are from country to country. While buyers can certainly research properties online in other countries, the information available is significantly less than what a buyer may find in the United States. If you're used to scrolling through sites like Zillow or Trulia, just know that it might take a little bit more effort to find comparable information overseas.

  • Check Residency Requirements 

While many countries use property purchases as a way to establish residency, not everyone wants ex-pats to own their prime real estate. For international buyers looking to move to Mexico, for example, properties within 50 km of the coast need to be purchased through a trust with a Mexican bank.

  • Research the Tax Implications

Make sure you understand the tax implications of purchasing property abroad. In many countries, it’s common to pay some type of transfer tax when the property is changing ownership which could increase the overall cost of your purchase by a good amount. If you're looking to rent your property at any time then you'll likely need to pay taxes on that income too.

Understanding the Foreign Currency Market

While it's common knowledge to prepare for some buyer's competition when purchasing property overseas, few take into consideration the added challenges you may face with the currency market.

The foreign exchange (FX) market is constantly fluctuating with demand driven by varying levels of tourism, trade, and inflation. With all of these factors influencing currency demand daily, staying up to date on the latest movements and current events can be quite challenging, especially if it's your first time interacting with the FX market in this capacity.

Without some in-depth knowledge of the foreign currency market, it’s easy to lock yourself into a bad transfer, leading to some major financial frustrations with your retirement purchase.

Consider Hedging Strategies

Whether you're looking to set up recurring transfers for your overseas mortgage payment or simply want to complete one large payment, working with an international payments provider who can help you weigh your payment options based on budget, timeline, and purchase location can help you save the most money on your investment.

Lock-In an Exchange Rate

While many people may set up recurring payments for their overseas properties, not everyone takes into account how rapidly exchange rates can make or break these transactions. Without some type of hedging strategy in place, you may find yourself paying vastly different amounts towards your mortgage month to month due to subtle changes in the market.

That's why working with an international payments provider, or currency specialist, who can help you set up a risk management strategy is paramount, especially if you want to maintain a certain budget.

In many cases, a forward contract may be the suggested hedging tool for you, as it can help reduce the possibility of adverse fluctuations from foreign exchange volatility by locking in a prevailing rate of exchange for up to two years.

Target an Exchange Rate

If you're looking to only make one large payment towards your retirement home, targeting your desired rate of exchange with rate alerts may be another option as you can take advantage of any upturns in the market without having to constantly monitor the market's movements.

While requirements for setting up rate alerts may vary based on the provider, they generally require that you set up an alert for your desired exchange rate through your specific provider account. From there, you simply wait for the notification that the rate has been reached.

You can also set up a market order which allows you to use that targeted exchange rate to initiate an automated exchange once it is reached. With this type of hedging tool, you're able to take advantage of positive market movements, even if it happens overnight.

The Bottom Line

While many people associate retirement with relaxation, few take into consideration the time, research, and dedication it takes to prepare for and invest in your new home, especially if the property is located overseas. Before you transfer your money internationally, be sure to do some research on both the current market and the various money transfer options available to you. Taking the time to understand how you can pay for your new home abroad will help you get the best value for your money, and ultimately a higher return on the next chapter of your life.

About the Author: Kelly Cutchin

In 2006 Kelly joined the Moneycorp Team based out of their Orlando Florida Office and has since then held various positions within the Moneycorp group. In December 2012, she took on the role of Country Manager for Moneycorp's USA operations where she leads a team of foreign exchange experts who work very closely with their global offices. Educating professionals on the importance of understanding the foreign exchange market and helping Realtors promote their businesses internationally are a few of Kelly’s initiatives and passions. Learn more about Kelly and her team by visiting Moneycorp Americas here