How snowbirds can save on currency exchange when buying or selling property outside Canada

Save on Currency Exchange When Buying Real Estate Outside Canada

LAST UPDATED: January 16, 2024

Every year, thousands of Canadian snowbirds buy or sell vacation homes and condos outside Canada in their winter destinations.

The costs associated with buying or selling these properties can really add up, and in most cases, there isn’t much you can do to save on these expenses.

However, one often overlooked area where it’s fast and easy to save a significant amount of money is on currency exchange – all it takes is a little bit of planning.

If you are considering buying property outside Canada – or selling your existing foreign property – you should always explore using a discount currency exchange service to convert your funds to or from Canadian dollars.

Here’s what you need to know…

Why should you consider using a discount currency exchange provider?

Simply put, discount currency exchange providers are an easy way to save significant amounts of money on foreign real estate transactions.

Most snowbirds simply use the exchange rate provided to them by their bank when converting funds to buy or sell a foreign property, which is usually a big mistake. Banks generally have currency exchange rates that are much worse than the rates you would get from a discount currency exchange provider.

While getting a worse rate from your bank may not matter as much when converting small amounts of cash, it can make a big difference when converting large dollar amounts, often saving you several thousand dollars when converting currency.

Take the following example:

Let’s say you are purchasing a home in the U.S. and need to covert $500,000 CAD to USD top cover the purchase price and other costs.

A bank would typically take a “spread” or fee in the range of 250 basis points – or 2.5% - to convert your funds to USD, which would come out to $12,500.

However, a discount currency exchange provider would only typically take a spread or fee in the range of 50 basis points – or 0.5% to convert the same funds to USD, which would come out to $2,500.

In this scenario, you would save $10,000 simply by converting your funds using a discount currency exchange provider instead of your bank.

When should you use a discount currency exchange provider?

There are two main scenarios where Canadians should consider using a discount currency exchange provider:

  • Buying a vacation property outside Canada: In this situation, you will likely need to convert Canadian currency to U.S. dollars – or whichever local currency is used in the country in which you are purchasing your property – to cover the cost of the purchase price or down payment, as well as any ancillary costs related to the purchase.
  • Selling a vacation property that you own outside Canada: In this situation, you will likely want to repatriate the proceeds of the sale back to Canada and convert the funds from the local currency to Canadian dollars.

In either case, you will be converting large dollar amounts - usually several hundred thousand dollars or more – which makes these scenarios ideal for using a discount currency exchange provider.

It is worth noting that while it is generally very easy to convert and transfer funds in and out of most countries where snowbirds buy or sell vacation properties, one exception is transferring Pesos out of Mexico to convert to Canadian dollars if you are selling a Mexican property and receiving the proceeds in Pesos. Transferring funds into Mexico to purchase a property is not an issue.

How do discount currency exchange providers work?

Discount currency exchange providers simply act as intermediaries between bank accounts, adding one more step to the currency exchange process.

For example, instead of transferring funds from your Canadian bank account to a U.S. bank account where the funds would automatically be converted to U.S. dollars, you would send the funds from your Canadian bank account to your discount currency exchange provider, who would then convert the funds to U.S. dollars at a preferred rate and deposit the proceeds into the U.S. dollar bank account.

Setting up an account with a discount currency exchange provider is relatively fast and easy. You will need to provide some personal information and identification to verify your identity, as well as your banking information so they know where to withdraw or send the funds.

While the setup process is usually fast and easy, it is highly recommended that you set up your account with a discount currency exchange provider well in advance of the date you will need to convert or transfer funds to avoid any possible delays and ensure you are aware of documentation requirements that might be necessary for making larger currency exchange transactions.

Things to consider/look out for:

There are a number of companies in Canada that offer discount currency exchange services, however you’ll want to make sure that the company you choose meets certain criteria to ensure your transaction goes smoothly. Here are a few things you’ll want to consider before choosing a provider:

  1. Track record and reputation: It goes without saying that before entrusting any company with your money, you’ll want to do your research to make sure they are reputable and have a strong track record.
  2. Expertise in real estate and large cross border transactions: Some discount currency exchange providers will provide you with a dedicated account manager who has specific knowledge and experience related to larger currency exchange transactions for real estate, as these types of transactions can often be more complex than common every-day currency conversion transactions. Your account manager will be there to assist you every step of the way from start to finish to get you the best exchange rate possible and ensure your transaction goes smoothly, including:

     Getting you the best exchange rate

    -   Ensuring the sender/recipient information is correct and set up in advance

    -   Timing the transaction to ensure your funds arrive on time

     Guiding you through any regulatory requirements related to large cross border currency transactions

    -   Assisting you if any issues should arise
  3. Forward Contracts: If your real estate transaction won’t be closing for weeks or months, some discount currency exchange companies offer forward contracts to help you lock in exchange rates and protecting against exchange rate fluctuations that could adversely affect you before your transaction closes.

The Snowbird Advisor Discount Currency Exchange Program

For over 5 years, Snowbird Advisor has partnered with OFX to offer our members an exclusive discounted currency exchange program featuring preferred exchange rates, flexibility, cutting edge technology and specialized customer support.

Over that time, many of our members have benefitted by using our currency exchange program for both their everyday currency exchange needs as well as specialized needs like converting large amounts of currency to purchase real estate outside Canada or repatriate funds to Canada after selling their foreign vacation properties.

If you need to convert currency to buy or sell a vacation property or any other real estate outside Canada, Snowbird Advisor’s currency exchange program can help you save money.

Disclaimer: The material provided on the website is for informational purposes only and does NOT constitute legal, tax, accounting, financial, real estate, medical or other advice, and should not be relied on as such. If you require such advice, you should retain a qualified professional to advise you.

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