Smart Currency Exchange answers a frequently asked question about how owners of overseas property can save money when paying for a foreign currency mortgage.

Article written by The Overseas Guides Company

Each month the mortgage payment on my Portuguese property is a fixed €850. I’m currently transferring money from my UK Sterling account to my Portuguese euro account to meet these payments. However, the fluctuating £/€ exchange rate means the amount of Sterling I need to send varies month by month. Is there a way I can minimise this uncertainty or even fix my payments in Sterling to help me budget my outgoings better?

Smart Currency Exchange sales consultant James Thorpe replies:

“Servicing a foreign currency mortgage from the UK does indeed leave you exposed to exchange rate movements. Paying it month by month is the obvious way of doing it but this can work against you as well as in your favour, depending on how the strength of Sterling against the euro varies month by month. No-one really wants this uncertainty.

“The good news is that we can not only make regular transfers for you but also offer you clever ways of fixing the amount your Portuguese mortgage costs you in Sterling each month, thereby helping you to budget. The first way of doing this is to agree an exchange rate with us that stands for up to a year – this is called a forward contract and requires you to pay a deposit of 10 per cent of the value of the total transaction. For example, if we fixed you a rate of €1.239=£1, you know that your monthly mortgage will cost you £686 for the next 12 months, regardless of what the exchange rate does. Or you may want to commit to a fixed rate for just six months, believing the rate may have improved after that.

“Another popular way of reducing your exposure to exchange rates is to transfer lump sums to your Portuguese bank account as and when you feel the rate is particularly favourable. Typically, you might transfer enough to cover three or four months’ worth of mortgage payments. Give us a call and we’ll happily talk you through your options.”

To find out more, visit the Currency Zone or download Smart Currency Exchange’s free report by clicking here.