Resale DVC Purchase Final Payment

[gskywalker]

For those Canadians who have bought a resale contract, what was the best rate/cost for your final payment? I have thought of whether it will be best to convert money through the bank, through a stock brokerage, through something like XE, etc. and then transfer/wire fees?

 

[Reepicheep]

I do my banking with TD Canada Trust, and have a brokerage account with TD Waterhouse. I find that I always get a slightly better exchange rate going through my brokerage account than my bank account.

To illustrate: a minute ago, I obtained the following exchange rate quotations if I were to purchase $10,000 in US dollars:

1.3385 - TD bank
1.3319 - TD Waterhouse brokerage

so on a $10k transaction, I would have saved $66 Canadian by going through my brokerage account.

TD has a bunch of different types of bank accounts and brokerage accounts, which I assume have different conversion rates. I also know that the rate is slightly better for larger transactions.

************************

Around ten years ago, I learned about what is probably the most cost effective way of doing conversions between Canadian and US dollars. It is kind of complicated, and It does involve some risk, so it is not for everyone.

Let's consider a large liquid stock that trades on both the Canadian and US stock exchanges, for example, Bank of Montreal. At any given moment, the price on the Canadian exchange tracks exactly with the price on the US exchange, after taking into account the current exchange rate. There CAN'T be any sort of price differential, since if there was a price differential large players could (for example) buy 100,000 shares of BMO on the Canadian exchange and simultaneously sell 100,000 shares on the US exchange, and pocket the difference in price.

I've now done the following series of transactions twice (five years ago and ten years ago):

- buy 200 shares of BMO on a Canadian exchange using Canadian funds
- phone TD Waterhouse, and ask them to move my BMO shares from my Canadian brokerage account to my US brokerage account
- sell the BMO on the US stock exchange, so the end result is that Canadian dollars have been converted to US dollars

THE PROBLEM: in my case, it always took around 2 days for the BMO shares to move between accounts. So, the price of BMO could drop during that time, and perhaps drop by a significant amount. I was fortunate both times I did this because the price of BMO went up, so I actually made a small profit on the transaction. So, a person shouldn't be doing this sort of thing unless they really know what they are doing, and can accept the possibility that they may end up with BMO shares they would take a loss on if they sold.

As I mentioned at the start, this procedure is kind of complicated, so definitely not for amateurs or the faint of heart.

 

[I Run Long]

I was just going to pose this question myself. Awaiting ROFR on a SSR resale contract. Hoping I pass and then I was wondering which route I should take in converting Cdn$ to US$ for wire transfer?

 

[Minniemoo15]

We transferred $ to our CIBC US bank account. Then wired from there. I’m not sure if it was the best exchange rate but dealing with such a large sum of money I wanted our local bank to be the ones dealing with it.

 

[efrant]

I do my banking with TD Canada Trust, and have a brokerage account with TD Waterhouse. I find that I always get a slightly better exchange rate going through my brokerage account than my bank account.

To illustrate: a minute ago, I obtained the following exchange rate quotations if I were to purchase $10,000 in US dollars:

1.3385 - TD bank
1.3319 - TD Waterhouse brokerage

so on a $10k transaction, I would have saved $66 Canadian by going through my brokerage account.

TD has a bunch of different types of bank accounts and brokerage accounts, which I assume have different conversion rates. I also know that the rate is slightly better for larger transactions.

************************

Around ten years ago, I learned about what is probably the most cost effective way of doing conversions between Canadian and US dollars. It is kind of complicated, and It does involve some risk, so it is not for everyone.

Let's consider a large liquid stock that trades on both the Canadian and US stock exchanges, for example, Bank of Montreal. At any given moment, the price on the Canadian exchange tracks exactly with the price on the US exchange, after taking into account the current exchange rate. There CAN'T be any sort of price differential, since if there was a price differential large players could (for example) buy 100,000 shares of BMO on the Canadian exchange and simultaneously sell 100,000 shares on the US exchange, and pocket the difference in price.

I've now done the following series of transactions twice (five years ago and ten years ago):

- buy 200 shares of BMO on a Canadian exchange using Canadian funds
- phone TD Waterhouse, and ask them to move my BMO shares from my Canadian brokerage account to my US brokerage account
- sell the BMO on the US stock exchange, so the end result is that Canadian dollars have been converted to US dollars

THE PROBLEM: in my case, it always took around 2 days for the BMO shares to move between accounts. So, the price of BMO could drop during that time, and perhaps drop by a significant amount. I was fortunate both times I did this because the price of BMO went up, so I actually made a small profit on the transaction. So, a person shouldn't be doing this sort of thing unless they really know what they are doing, and can accept the possibility that they may end up with BMO shares they would take a loss on if they sold.

As I mentioned at the start, this procedure is kind of complicated, so definitely not for amateurs or the faint of heart.

What you did is probably one of the best ways to convert CAD to USD. However, you can now do the same thing with DLR (an ETF that represents the value of the U.S. dollar) rather than using shares, so there is no risk of the share price falling in the interim. So, buy DLR (which is traded on the TSX in Canadian dollars), call TD Waterhouse and ask them to move it to your USD Waterhouse account (at which point it becomes DLR.U, which is traded in U.S. dollars on the TSX), and sell it. You lock in the f/x rate when you purchase DLR, so it doesn't matter when you sell DLR.U. All in cost is two trades ($9.99/trade with Waterhouse) and 0.1% on the spread, so for ~$10,000, it works out to ~0.3%. Much better than the ~2.5-3.0% that a bank will charge you.

Here is the ETF product sheet for anyone that wants to look further into it: http://www.horizonsetfs.com/horizons/media/pdfs/productsheets/DLR-Product-Sheet.pdf

 

[deedubb]

https://www.knightsbridgefx.com/
Don't go through the bank. You will definitely get a better rate through Knightsbridge.

 

[tinkerone]

I do my banking with TD Canada Trust, and have a brokerage account with TD Waterhouse. I find that I always get a slightly better exchange rate going through my brokerage account than my bank account.

To illustrate: a minute ago, I obtained the following exchange rate quotations if I were to purchase $10,000 in US dollars:

1.3385 - TD bank
1.3319 - TD Waterhouse brokerage

so on a $10k transaction, I would have saved $66 Canadian by going through my brokerage account.

TD has a bunch of different types of bank accounts and brokerage accounts, which I assume have different conversion rates. I also know that the rate is slightly better for larger transactions.

************************

Around ten years ago, I learned about what is probably the most cost effective way of doing conversions between Canadian and US dollars. It is kind of complicated, and It does involve some risk, so it is not for everyone.

Let's consider a large liquid stock that trades on both the Canadian and US stock exchanges, for example, Bank of Montreal. At any given moment, the price on the Canadian exchange tracks exactly with the price on the US exchange, after taking into account the current exchange rate. There CAN'T be any sort of price differential, since if there was a price differential large players could (for example) buy 100,000 shares of BMO on the Canadian exchange and simultaneously sell 100,000 shares on the US exchange, and pocket the difference in price.

I've now done the following series of transactions twice (five years ago and ten years ago):

- buy 200 shares of BMO on a Canadian exchange using Canadian funds
- phone TD Waterhouse, and ask them to move my BMO shares from my Canadian brokerage account to my US brokerage account
- sell the BMO on the US stock exchange, so the end result is that Canadian dollars have been converted to US dollars

THE PROBLEM: in my case, it always took around 2 days for the BMO shares to move between accounts. So, the price of BMO could drop during that time, and perhaps drop by a significant amount. I was fortunate both times I did this because the price of BMO went up, so I actually made a small profit on the transaction. So, a person shouldn't be doing this sort of thing unless they really know what they are doing, and can accept the possibility that they may end up with BMO shares they would take a loss on if they sold.

As I mentioned at the start, this procedure is kind of complicated, so definitely not for amateurs or the faint of heart.

Are you not charged for the TF? I would think you would get hit with a fee by either the Cnd side or the US side but I certainly don't know how this works. What I do know is you have to claim this on your income tax, difference between what you bought it for and what you sold it for, so you would have to make a good profit before it would make sense. Seems like a lot of work, to me, for a small savings.

 

[CdnKayDee]

We have used Knightsbridge and recommend them.

 

[efrant]

Don't go through the bank. You will definitely get a better rate through Knightsbridge.

We have used Knightsbridge and recommend them.

What are their fees? I don't see it on their website. For example, for buying US$10k, what do their fees work out to be? And how long does it take to complete a purchase? And can they deposit USD in either a Canadian USD account or a U.S. bank account?

 

[CdnKayDee]

You set up an account and then you send for a quote. Its good for a certain period of time. We have always got the funds deposited in our Canadian USD account. It takes a few business days. It has always been slightly better than the bank.

 

[von Monster]

We have used Knightsbridge and recommend them.

I've used Knightsbridge, VBCE, XE, and Transferwise - setting up an account takes about 30 seconds with each and you can get a quote once you have the account in seconds. Just pick the one that you find the easiest and gives you a rate you want.

Are you not charged for the TF? I would think you would get hit with a fee by either the Cnd side or the US side but I certainly don't know how this works. What I do know is you have to claim this on your income tax, difference between what you bought it for and what you sold it for, so you would have to make a good profit before it would make sense. Seems like a lot of work, to me, for a small savings.

Yeah, what's being discussed is called Norbert's gambit; it's uneconomical unless you're moving at least $20k and does carry a fair amount of risk that the markets move enough while your attempting to process the transactions (Purchase stock, transfer to US account, Sell stock) that you reach nowhere near spot. Then you'd have to add in your banks wire fee in order to send it to your closing agent.

It used to be more popular before the rise of the online currency brokers, but I haven't heard of anyone using it in quite awhile.

 

[efrant]

I've used Knightsbridge, VBCE, XE, and Transferwise - setting up an account takes about 30 seconds with each and you can get a quote once you have the account in seconds. Just pick the one that you find the easiest and gives you a rate you want.

So none of these services have set fees that are published? (And I assume when you ask for a quote, they won't even quote you any fees, but rather a rate, similar to what a bank quotes you, which clouds the ability to see what they are actually charging you.) With the method mentioned earlier, I know what the fees are: $19.98 + 0.1%. They don't change, irrespective of the f/x rate or the amount converted.

 

[CdnKayDee]

No, they don't tell you their fee. They tell you how many Canadian $s it will cost for X amount of USDs. Again I have found their rates to be better than the bank. I don't really care what their cut is just that I am saving a few dollars.

 

[von Monster]

So none of these services have set fees that are published? (And I assume when you ask for a quote, they won't even quote you any fees, but rather a rate, similar to what a bank quotes you, which clouds the ability to see what they are actually charging you.) With the method mentioned earlier, I know what the fees are: $19.98 + 0.1%. They don't change, irrespective of the f/x rate or the amount converted.

No the quote you get is the quote you pay - they all have set fees for the transfer, you need to do a full quote (which is usually held for 5 minutes or so) as the rate you're charged is based off the spot rate which is updated more or less every second. The more you purchase the better your transfer rate will be though - in your scenario you're guaranteed paying the fee + 0.1% where you might be paying less using an agent, you save on the wire fees, and you assume zero risk on the market moving during your transfer. Most people would find the guaranteed price to be with the less than $20 they're going to save using Norbert's in the sub $100k move.

If I'm going to move more than that I'd likely go with the Gambit but I'd still get a quote from a broker, but to each their own.

 

[efrant]

Yeah, what's being discussed is called Norbert's gambit; it's uneconomical unless you're moving at least $20k and does carry a fair amount of risk that the markets move enough while your attempting to process the transactions (Purchase stock, transfer to US account, Sell stock) that you reach nowhere near spot.

I would argue that it's not really a "gambit" anymore, because with the advent of the U.S. currency ETF, you no longer needed to use stocks, and hence there is no risk of movement of the stock price.

Then you'd have to add in your banks wire fee in order to send it to your closing agent.

It used to be more popular before the rise of the online currency brokers, but I haven't heard of anyone using it in quite awhile.

And if you are a TD or RBC cross-border customer, there are no wire fees or any other cross-border/transfer fees between Canada and the U.S.

You could be right in that the cost of using the services you mentioned is lower than the "gambit", but I remember from when I checked Transferwise (the only one I checked a while back), it was only cheaper for very small amounts.

 

[von Monster]

I would argue that it's not really a "gambit" anymore, because with the advent of the U.S. currency ETF, you no longer needed to use stocks, and hence there is no risk of movement of the stock price.



And if you are a TD or RBC cross-border customer, there are no wire fees or any other cross-border/transfer fees between Canada and the U.S.

You could be right in that the cost of using the services you mentioned is lower than the "gambit", but I remember from when I checked Transferwise (the only one I checked a while back), it was only cheaper for very small amounts.

Fair enough - the US Currency ETF does change things on the financial sense (only slightly; the fx rate could change in the time it takes you to perform the transfers and you could wind up either higher or lower. Hence still a 'gambit'), but unless you are a cross-border customer you're going to incur double wire fees. First to your USD account, and then to your closing agent. Unless your cross border account provides free wire fees?

In any case for the average person just looking to make one or two decent sized transfers I'd say the currency brokers are still a very good option.

 

[efrant]

Fair enough - the US Currency ETF does change things on the financial sense (only slightly; the fx rate could change in the time it takes you to perform the transfers and you could wind up either higher or lower. Hence still a 'gambit'),

Actually no. That's the main point of that ETF. Once you purchase the ETF, the rate is locked in (i.e., you've purchased your USD). It doesn't matter when you sell it -- there is no currency risk (at least not any more than using kbfx or any other service) once you made the purchase.

but unless you are a cross-border customer you're going to incur double wire fees. First to your USD account, and then to your closing agent. Unless your cross border account provides free wire fees?

There are no fees at all. For example, looking specifically at TD, there are no fees to move USD funds from your Waterhouse trading account to your Canadian USD account, and there are no wire fees to transfer USD funds from your Canadian USD account to your bank account in the U.S.

In any case for the average person just looking to make one or two decent sized transfers I'd say the currency brokers are still a very good option.

Agreed.

 

[gskywalker]

I was familiar with Norberts and used to use it for exchanging money for trading US$ stocks. The ETF sounds like the best option, I had not been familiar with this ETF option. Although then I suppose I just need to figure out how the money gets wired to the title company in the states. I would imagine the fees would be low to wire through a bank as I have staff benefits but it has been so many years since I worked for them, I don't know how wires work anymore. In terms of whether the amount will make sense, I will have to send 33k US$.