More and more people are buying a villa in Lanzarote in the Canary Islands. So youve spent many, many hours searching for the perfect villa, and youve found it! Everything is arranged with the estate agent at lawyer, now you just need to pay for it. So how do you send over the money?

The cheapest and easiest way is to use a specialist broker. You will see them advertised in overseas property magazines and the internet, or your estate agent can recommend one for you. By using a good broker you can achieve very favourable rates of exchange compared to what you might get at your high street bank, saving you perhaps thousands of pounds on the purchase price. When buying abroad, normally you have to pay a deposit to secure the property and have to pay the balance in 2 or 3 months time. For the deposit, you are likely to use a Spot Contract. This is where the rate of exchange is fixed at the moment in time when it is asked for. This rate of exchange can move quite a bit even in just one day. For the balance of the money, the most common method is to use a Forward Contract. This fixes a price today for a transaction to be made in the future. This eliminates the risk of currency fluctuation changes and means you know exactly how much your property is going to cost you.

Currency levels can fluctuate quite markedly as weve said. Sterling to Euro levels have moved by over 5% in the past 6 months, which means that on a property of 200,000 pounds sterling value, fixing the rate at the start could have saved you 10,000 pounds by the time it comes to hand over the money. Of course it can work the other way and you could lose the opportunity to gain through the fluctuation of the rate of exchange! Do you want to take the gamble?