Negative movements in the exchange rate can drastically increase the cost of property to Canadians
If you are a Canadian looking to buy property in Costa Rica, you will inevitably need to transfer your currency to US dollars to buy the property or arrange financing. Canadian buyers should pay close attention to the USD/CAD exchange rate, as volatility in the currency markets can have drastic repercussions on the final Canadian dollar (CAD) cost of an American property priced in US dollars (USD).
For example, a Canadian buyer wants to purchase a property in Costa Rica priced at $300,000 USD. In the first week of November 2007, it would have cost approximately $271,500 CAD (USD/CAD = .9050). One month later in December 2007 the same property would have increased in cost due to the exchange rate to $306,000 CAD (USD/CAD = 1.0214). In other words, the property in one month became $34,500 CAD (over 12%) more expensive to a Canadian!
Currency exchange specialists like HiFX can help you protect against currency fluctuations that would increase the cost of your property by locking in an exchange rate for up to two years with a ‘forward contract’. This service can be useful if you have a lengthy closing period or future property payments. With a ‘forward contract’ you will have locked in the cost of the property in CAD and will be unaffected by any volatility in the currency market. HiFX provides ‘forward contracts’ free of cost and requires only a 10% deposit.
Canadians have amazing purchasing power today
Fortunately for Canadians, now is an attractive time to look for a property in Costa Rica as CAD has strengthened heavily against the USD over the last few years, making property in Costa Rica even less expensive. On September 20th, 2007, the Canadian dollar reached parity against the US dollar for the first time since 1976. This means that Canadians have more purchasing power now than they have in the last 31 years!
If a Canadian buyer was looking to buy a $300,000 USD property in Costa Rica in January 2008 it would cost approximately $300,000 CAD. If five years ago the Canadian had been looking to buy the same $300,000 USD property, it would have cost them a staggering $485,000 CAD. In other words, the same property is now $185,000 CAD (almost 40%) cheaper than it was five years ago!
Use a currency specialist to pay for your property
Working with a currency exchange specialist to make property payments can not only save you time and hassle, it can also save you money. The fact is that many individuals will simply use the exchange rate offered by their personal bank. Currency specialists can typically offer more competitive rates of exchange than personal banks, to save you on the cost of your property. The bank may also charge wire transfer fees, commissions, and bank receiving fees. Many individuals don’t realize there are better alternatives available to them.
HiFX has seen an average savings of 1%-4% of the transaction amount for its clients, and in addition will transfer funds free of charge. On larger transfers the savings can turn into thousands of dollars. HiFX does not speculate with funds and all funds are held in a secure private client trust account at the Bank of Montreal in Canada. It may be worth speaking with a consultant at HiFX to register for no cost or obligation.
If you have any questions about the currency exchange rates, or would like to learn more about HiFX fee-free currency exchange services, please contact Thomas Wight.
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