Best Way to Slowly Purchase Euros for Eventual House Purchase

09/22/2010 - 16:10

We are contemplating starting to purchase euros with US dollars, in anticipation for an eventual house purchase in Italy, which could occur anytime we find a house within the next 5 years or so. We figure that with the exchange rate better than it's been in the past, now may be the time to dollar-cost-average euro purchases. Our goal is to retire to Italy in 5 years, sell our US home and live full-time in Italy. I have a family member who has a euro-denominated account with the bank UBS and she buys euros as needed through them, and it then sits in her account earning about 1/2% interest per year. She has holiday apartment in France and uses the funds to partially purchase the house, along with the normal bills that need paying. Would we be better off buying euros through a currency trader and then transferring them into a a euro bank account like UBS, buying through a currency trader and having money sit there - I believe you can do this for up to 2 years, or just buying through UBS directly? We were thinking we would like to start out with possibly $20,000 US and then add periodically to it, possibly every month or quarter, depending on the exchange rate.



Hi There  I live in Switzerland and bank with UBS and would not recommend that you buy currency with them.  I have done so moving cash into Euro and it is very expensive.  By far the best method is, as you suggest, to use a currency broker.  I can give you the details of the company i use and have had checked out if you wish. The interest rates in Europe are low reflecting the generally low rates around the world.  Our bankers in Italy (we build and sell apartments) offer our clients a rate of 1.85% on mortgages as we fixed early.  At those kind of rates, which are available, it may make sense to leave cash on deposit and borrow when you find the place you like. Of course, you will need to take advice on this. USD/EUR has done very well and this looks like a good time to buy currency but you should get some yield on it.  The yield cannot keep up with the increase in Italian property prices as these are already rising.  there was a good article on this recently: if you want it send me a message and I can email it to you  I like the photo in your ID.  Is it the Roman baths at Fermo?   fabrizio

Hi, currency broker is best method for exchanging large chunks. (UBS shameful bunch) Fabrizio, if you dont mind me asking which banks are offering fixed rate mortgages of 1.85%? or are you alluding to a non retail deal that no longer exists? What approx are the best fixed retail rates on offer at the moment?

The Bank is MPS and we did a building mortgage as a tracker at 1.2 over Euribor.  This has worked out well and was structured so we could split it out to buyers.  main motive for this was so that people wouldn't have to go through the pain of proving income or wealth.   Loans are low LTV at around 30% but it all helps As to new mortgages at that rate: I don't think so.  The bank would like to change the basis by refixing but I there is no advantage to that at this stage As for FX, its amazing how we all work so hard to get a deal on a houser and then just give away as much as 1% on FX to these banks F

Salve Fabrizio, Good eye for correctly identifying the Roman cisterns in Fermo.  We've been twice and never cease to marvel at their beauty.  I am interested in both reading the article you are referring to and getting the name of the currency trader you recommend and will send you a pm. We have been visiting southern Marche (provincia di Fermo) for about seven years and hope to eventually find a house to purchase.  It's been difficult as the prices are quite high, as you are probably aware but we hope that something will eventuallyl crop up.    

Lisa, this is the advice that I would give to you. Open an euro account with one of the big European banks. It can be UBS, BNP, HSBC, Intessa or whoever else you like. (that way you should sleep easy that your money is safe and you will also be protected up to around €100,000 by European deposit insurance). Forget about receiving any significant interest on your euros. ( 6 month Euribor is 1.13% and expect to receive 0.25% to 0.5% less than this). Then use a currency broker to transfer money into the account. A broker should be able to obtain a better rate for you than a mainstream bank. Now do one trade. No matter how small. This will set down your marker rate and test that the transaction stream functions efficiently. From there, its up to you to transfer more dollars when and if you please. No-one has a crystal ball but you are right to plan ahead. If you are dollar based and view the dollar as your home currency then movements in the dollar-euro rate will probably be the biggest determinant of the actual "real" price that you pay when you come to purchase your house. Good luck.

We use Caxton. Not sure they provide the very best rates but they are FSA authorised. It may be difficult for you, however, as a US citizen to open a currency account with a European broker. I'm not sure about this though. Maybe your best bet is to use a US regulated broker. I really don't know. Thinking about it, maybe you should check out euro accounts with the likes of BoA, or Citi etc. The real point I was trying to make was if you are not euro based, currency fluctuations and not house price movements could be the biggest factor in how well you do.

Will check out the US based banks you suggested as well as some European ones, as we do have dual citizenship (Italian) now.  Thanks for the name of the currency trader.  I have several companies to investigate now along with banks so have my work cut out for me.  Also need to contact some Europan banks  to discuss possible mortgages, which is kind of a catch 22.  We had been pre-approved with Banca Woolwich a few years ago, but I don't know if they still write mortgages in Italy.  The BCC in Communanza told us we would need to be residents, although it helped a bit having Italian citizenship, but that there might be a way around this.  They told us once we find a house, to apply for a mortgage, but we don't want to wait until we have found something to see if they will give us a mortgage.  We'd really like to have some bank financing in place before we look more seriously for a house as we'd prefer to get a mortgage in Europe, rather than the USA.  My sister bought a holiday apartment in Paris and was able to get a mortgage there, even though she is a US citizen and not dual.

Hi Lisa, We were in Italy this summer and found a property in Umbria which we fell in love with, put an offer on and are in the process of paying for it (in total) between now and when we return in June to stay for our first summer there.  The place is a 300 year old building which is being renovated and so the builder didn't require an outright full payment as he is working on it right now.  We are making 4 payments to him between now and June.  We were recommended to check out HiFX for a currency exchange but they specifically deal with UK exchanges.  Their US affiliate is called Currency Online.  We have been using them and are very pleased.  It is simple to set up an account.  When we needed our earnest money, we simply went online, watched the rate "live" on their website, purchased a small amount of euros for the offer money, had our bank do a wire transfer to Citibank NY and then advised Currency Online where we wanted to euros to be sent.  No fees involved.  Excellent customer service via emails and phone. We, too, are watching the rates and hope to purchase some euros gradually over the year to build up for our next larger payment.  (This week hasn't been a good one for the dollar but we have a few months, luckily, before out next payment.)  No interest is accrued in the account while they hold our euros, but grabbing them at a favorable rate supercedes that. Hope this information is helpful to you!  Good luck on your search and feel free to email me if you have any more questions.  It's nice to find a fellow "americano" on this board with similar issues!  

Thanks SteveO, So that I'm clear, are you planning on using Citibank for parking euros?  I wasn't sure of what the connection is.  You mentioned having your bank wire funds to Citibank and then purchase with Currencies On-line and have them wire the money to Italy.  I wasn't sure why you were using Citibank.  I was also surprised that you mentioned there were no fees as some years back I had contacted I believe Currencies On-Line and thought there were fees to wire money. Thanks very much for the advice!

Hello again!  We just made our second successful transfer using Currency Online yesterday and we continue to be happy with the process.  This time we transfered a large sum and it was just as easy and well-managed as the first smaller transfer for our earnest money for the sale.  There are no fees for any transaction over $5000 - under $5000 there is a $5 fee, which still seems very reasonable to me.  Check out their website.  We also made a few calls to their toll-free number and they were very helpful and walked us through the process.  I believe that our agent was actually in New Zealand. To clarify the Citibank question that you had, the sequence went like this for us:  We watched the euro exchange rate in two places online: on as well as signing into Currency Online and watching their rate for the amount of euros we needed to buy.  When it reached an exchange rate that we were satisfied with, we bought them simply by clicking on their "Accept" button.  We were able to see the exact amount of dollars we needed to pay before we made this decision. C.O. put the euros directly into our account and we then needed to arrange the payment.  We bank with a credit union and so we arranged a wire transfer to Currency Online to move our dollars to our Currency Online account to pay for the euros.  The credit union charged a $25 fee for this - this was our only extra fee we needed to pay from start to finish.  We sent our dollars to C.O's US bank which is Citibank New York.  C.O. held the euros for us until we gave them directions to transfer the euros to our builder's bank account in Italy.  There was no fee for us or for him.  As it turns out, we didn't need to send him the euros right away, so C.O. held them for us for about one week until I went online and simply requested them to transfer the euros.  They would have held them as long as I had requested them to.  As I mentioned before, we get no interest while they are holding our money, but it turned out nicely for us, because the euros cost us almost $2000 less than they would have had we bought them today (only 7 days later!) because the euro/dollar rate dropped and wasn't in our favor over the course of the last few days.  We hope to buy some more euros when the exchange rate improves and will have C.O. hold them for us until our next payment is due in several months. Whew.  This makes it sound much more complicated that it really was.  Again, we're happy to share our experience - let us know if you have any more questions.  (I realize that this sounds like an advertisement for C.O., but we are very happy with them and our British friends have been very happy with C.O.'s affiliate, HiFx.) SteveO

Thanks for the explanation SteveO.  I will go on-line and check out the currency trader and try to ascertain if they are insured so that we would be protected in the event that they go bankrupt like the other currency trader being discussed on the Forum. Another solution could be to set up an bank account such as UBS that has euro-denominated accounts.  We could transfer funds from our bank to the currency trader and then have them wire money into the UBS account, to hold until we need it.  I did inquire about an account with them and there is an annual fee of I believe $150.00 US and they give a small amount of interest - .25% last time I checked.  I need to find out if UBS has fees to wire funds to Italy.  Will keep you posted.

If your transfer is within the EU (ie you use a branch of UBS in Europe, not Switzerland as this is outside eu) the transfer is free and takes 3 days . An express transfer costs €25   make sure the bank is bonded like the UK banls where the government covers deposits to a level: I am unsure how much this is.  using a number of banls up to this level safeguards your cash but increases your expenses F

Thousands of people fear they will not be getting their holiday money after Cornwall-based company Crown Currency Exchange went into administration Continue reading the main story

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Thousands of people face uncertainty over travel money after an exchange firm went into administration. Crown Currency Exchange, one of the UK's biggest foreign exchange websites, has collapsed - blaming the downturn in the travel market. Administrators MCR said that an estimated 13,000 consumers would be directly affected. These people should not expect an early resolution in the case and a quick return of money, administrators said. Collapse The business, based in Hayle in Cornwall, was established by husband and wife Peter and Susan Benstead five years ago.It allowed individuals and business customers to pre-order foreign exchange at a set price up to a year in advance, with amounts of between £300 and £10,000 available. But its bank accounts were frozen by Barclays at the weekend, barring it from withdrawing or transmitting any money to customers. And administrators from MCR and SPW were appointed on Monday. Continue reading the main story

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When the money did not arrive it left me feeling sick”

Andrew ParsonsCustomer They said the business had processed hundreds of millions of pounds worth of foreign currency in the last five years, providing travel money in 80 different currencies, as well as travellers' cheques and money transfers. "Like many operators in the travel sector, it has experienced a difficult trading environment during the course of the past 12 months which has been exacerbated by a further downturn and general tightening of the travel market," said administrator Paul Clark, of MCR. The administrators are contacting all those affected to advise them on their individual situation, but these people could also contact the company. "I have no doubt that they will be understandably concerned about their own position and we recommend that they contact the company directly," Mr Clark said. "We fully appreciate the difficult position in which many will now find themselves in - many in the build-up to holidays or business trips, as well as money transfers associated with second home purchases. However the administration process is in its early days and we cannot guarantee an early resolution for those looking for a quick return of their money." 'Shaking' Andrew Parsons, from Bedworth near Coventry, was due to receive £1,500 from Crown Currency Exchange on Friday, which was supposed to be spending money for a surprise family trip to Florida. He said he had been saving up for 14 months. "When the money did not arrive it left me feeling sick. I was on the verge of crying at work and physically shaking," he said. Mr Parsons, who is due to fly to Florida in a few days, has been left trying to borrow money from his friends and family to replace the lost currency. He said he and his family had made sacrifices to be able to fund the trip and he now felt like he had been "robbed".

This is not my field at all, but I was alerted to the information (after the fact) that Crown Currency, although 'recognised' by the FSA (a UK based consumer protection agency in the financial sector) was not 'approved' by the FSA. This, it appears, is quite an important distinction - but who would have thought it! Sad for the guys who got caught out by the failure of Crown Currency.

well a market prof. The Euro is very strong against the $ at the moment (has increased 11% since end Aug) so I would say now is NOT a good time to trade. Historically well between 2002-5 was in a 90c-1.20 range. Its when the rate is within that band I would sell $ buy E if I were you. Not above 1.20 and certainly not at 1.40 where it is now. At 1.60 which is where it was 2008 Id actually Sell Euros. To avoid the huge spreads banks charge you use I am not affiliated to this Co. I use them however and they are great. Its like ebay for currency. The site explains how it works. Will save you c5% slippage fees the banks take out of you. On a large amnt that adds up. All you need is a Euro account to pay proceeds into. Message me if anyone wants more details on rates    

Thanks everyone for all of the information you have provided which is very helpful.  As has been stated, we know that now is not the time to be buying euros.  We just want to have all of our research done so that when the time is right, we will have everything in place to get started.