Find the right online transfer company and save thousands when putting down a deposit on an overseas property.
So you’ve decided to buy a property overseas – maybe for yourself, maybe for a loved one to live in, or maybe simply as an investment. You’ve found the perfect property and agreed terms with the seller, so now all you have to do is pay a deposit.
Unfortunately, sending money overseas can be an expensive exercise, especially if you’re sending tens or hundreds of thousands of dollars for a home deposit. However, if you know how to find the best exchange rate and the right transfer provider, you can save thousands on the total cost of the transaction.
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|1 USD =||1.0000||1.2652 Inverse: 0.7904||1.2618 Inverse: 0.7925||0.8094 Inverse: 1.2354||6.3473 Inverse: 0.1575||0.7133 Inverse: 1.4019||64.8750 Inverse: 0.0154||18.6467 Inverse: 0.0536||52.2188 Inverse: 0.0192|
|1 AUD =||0.7904 Inverse: 1.2652||1.0000||0.9973 Inverse: 1.0027||0.6398 Inverse: 1.5631||5.0166 Inverse: 0.1993||0.5638 Inverse: 1.7737||51.2745 Inverse: 0.0195||14.7376 Inverse: 0.0679||41.2715 Inverse: 0.0242|
|1 EUR =||1.2354 Inverse: 0.8094||1.5631 Inverse: 0.6398||1.5589 Inverse: 0.6415||1.0000||7.8415 Inverse: 0.1275||0.8813 Inverse: 1.1347||80.1473 Inverse: 0.0125||23.0364 Inverse: 0.0434||64.5116 Inverse: 0.0155|
|1 GBP =||1.4019 Inverse: 0.7133||1.7737 Inverse: 0.5638||1.7689 Inverse: 0.5653||1.1347 Inverse: 0.8813||8.8980 Inverse: 0.1124||1.0000||90.9451 Inverse: 0.0110||26.1400 Inverse: 0.0383||73.2030 Inverse: 0.0137|
Definition of Best: There is no one exchange rate that is best, and what is best for you may not be best for someone else. This is because there is a range of other factors unique to your situation that will influence the exchange rate for example the time you make an international money transfer and the transfer fee. There are many features to consider in a money transfer provider in addition to the exchange rate, so make sure you compare your options and select a provider that meets your transfer needs.
How to make a home deposit on an overseas property
If you want to put down a deposit on a home in another country, you’ll need to find an affordable way to transfer the necessary money overseas. There are two options for doing this:
- Sending an international money transfer via your bank
- Sending the money via an online money transfer company
We’ll take a closer look at the benefits and drawbacks of these two options later in the article. In the meantime, because you need to send a substantial amount of money overseas, you might be wondering if there are any regulations you need to be aware of. While you don’t have to worry about foreign exchange controls when transferring money out of Australia, all transactions over $10,000 are reported to the Australian Transaction Reports and Analysis Centre (AUSTRAC) to prevent money laundering and the financing of terrorism.
There may also be foreign exchange controls in place in the company you are transferring funds to. Make sure you’re aware of these before making plans to pay a deposit.
Risks and regulations when buying an overseas property
There are plenty of potential advantages to buying an overseas property, including the potential for capital growth and overseas rental income. However, remember that there are also a few downsides you should be aware of.
You’ll need to disclose the purchase of an overseas property to the Australian Taxation Office (ATO) in your next tax return. This will cover issues such as the rental income you earn from the property, as well as any gains or losses that affect your capital gains tax (CGT) liability.
You may also be required to pay tax on the rental income you earn in both the country where the property is located and in Australia. The Australian Government has double tax agreements in place with many foreign governments, which can help reduce the amount of tax you pay, but it’s important to get advice from your accountant before making a purchase.
Other risks you may face include:
- A lack of knowledge about overseas property markets
- Difficulty obtaining finance
- Difficulty managing and maintaining your property from a distance
- Additional charges such as stamp duty
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How the exchange rate affects your transfer
As we mentioned above, there are two options when transferring large sums overseas. Most people simply choose to send money via their bank – it’s quick, convenient and you get to deal with a financial institution you know you can trust.
However, banks typically impose a sizable margin on the foreign currency they sell to you, which means the exchange rate you receive for your transaction will be well below the interbank rate. And when you’re transferring tens or even hundreds of thousands of dollars, even a slight dip in the exchange rate can make a huge difference to the overall cost of your transfer.
Meanwhile, online money transfer companies are international transfer and foreign exchange experts. Because they have much lower margins than the banks, the exchange rates they offer are typically much closer to the interbank rate – which could help you save thousands of dollars.
In addition, online transfer companies often charge minimal fees when compared to banks, with some even offering fee-free transfers for large transactions. You can also access tailored advice and assistance from a personalised account manager who can answer any questions you may have about the transaction.
Paul needs to send US$50,000 to the United States to pay for a deposit on a house. He approaches his bank to handle the transfer but is disappointed when he sees that the exchange rate they quote is well below the current interbank AUD/USD exchange rate. Desperate to save money on the transaction wherever possible, Paul compares his bank with the cost of sending the transfer via a couple of online money transfer providers. As you can see in the table below, both online transfer companies allow Paul to save more than AUD$3,000 when compared to his bank. However, thanks to online money transfer company B’s high exchange rate and waived transfer fee, the transaction is AUD$3,503.05 cheaper than if he sends the funds with his bank. This clearly shows just how important it is to compare money transfer providers before sending funds overseas to pay for a house deposit.
The importance of comparing transfer providers
Bank Online money transfer company A Online money transfer company B Exchange rate 1 AUD = 0.705100 USD 1 AUD = 0.7385 USD 1 AUD = 0.7415 USD Transfer fee AUD$22 AUD$5 Free AUD needed to send US$50,000 including fee AUD$70,933.93 AUD$67,709.81 AUD$67,430.88 Money saved compared to bank transfer (including transfer fee) - AUD$3,224.12 AUD$3,503.05
How to choose a money transfer provider
Paul needs to send US$50,000 to the United States to pay for a deposit on a house. He approaches his bank to handle the transfer but is disappointed when he sees that the exchange rate they quote is well below the current interbank AUD/USD exchange rate.
Desperate to save money on the transaction wherever possible, Paul compares his bank with the cost of sending the transfer via a couple of online money transfer providers. As you can see in the table below, both online transfer companies allow Paul to save more than AUD$3,000 when compared to his bank.
However, thanks to online money transfer company B’s high exchange rate and waived transfer fee, the transaction is AUD$3,503.05 cheaper than if he sends the funds with his bank.
This clearly shows just how important it is to compare money transfer providers before sending funds overseas to pay for a house deposit.
How can you find the best features and the best value for money when sending money overseas? Keep the following features in mind when comparing transfer providers:
- Exchange rates. As the above case study shows, when sending such a large amount of money overseas, it’s essential that you hunt around for the best available exchange rate. However, remember to also consider fees when calculating the total cost of a transfer.
- Transaction fees. How much is the fee for sending an international transfer? Is there a fee-free threshold available, allowing you to avoid fees on large transactions?
- Transfer speeds. Speed is critical when paying a home deposit overseas, so check with each provider to find out how long it will take for the funds you send to arrive.
- Transfer options. Does the provider allow you to lock in a rate for a future transaction by using a forward contract? Can you use a limit order to specify the minimum rate you are willing to accept and then let the transfer company automatically send your transfer when that rate becomes available?
- Regular transfers. If you need to transfer money overseas in several smaller transfers rather than in one large transaction, can you save time by setting up a recurring payment plan? If so, will this incur any additional fees?
- Personalised account manager. When you’re sending a large amount of money overseas to pay for a home deposit, it’s important that you’re able to access assistance whenever you need it. Check to see whether you will be given a personal account manager who can help oversee your transaction and answer any questions you may have.
- Other help options. If you need assistance with your account, can you access help online, via email and/or over the phone?
If you carefully consider these features and compare a wide range of options, you can drastically reduce the cost involved in putting down a deposit on an overseas property.