When do you need a forward contract?

Forward contracts

When might you need a forward contract?

When buying overseas property, usually an initial deposit will be payable, with a completion payment of the bulk of funds required some months later. Of course, exchange rates can fluctuate meanwhile, effectively making the price of your property in Pounds change on a daily basis.

To avoid the risk of a falling exchange rate, which would increase the cost of your completion payment, you can use a Forward Contract, and forget about tracking exchange rates.

If you’re buying a new build property, you might have a series of payments to make over a longer period – you can use several Forward Contracts to cover these too.

It’s not unusual for rates to change by 5-10% in a 3-month period, so a completion payment could change by thousands of pounds if you leave things to chance. Using a forward contract removes the risk of your property price increasing beyond your budget – if you wouldn’t buy a property in the UK without knowing the exact price first, why do it when buying abroad?