Free money: How to make the exchange rate work for you

Day to day, it works out just fine to know that the exchange rate is roughly 20 pesos to 1 US dollar. We don’t need to know the exact exchange rate if we’re just buying some Al Pastor tacos or huevos rancheros.

But when we were buying our apartment, we realized that it was important to pay attention to the rate. If it went up from 20 to 21 pesos per dollar, we would effectively save about 5% on the sale price. That adds up to a lot of money. It’s a $12,500 difference on a $250,000 purchase, for example.

Find the company you want to use for wire transfers

I researched a few different companies for transferring money and settled on Wise. Their balance of fees and exchange rates worked out best for us. (Some companies don’t charge fees, but they offer a lower exchange rate, so it ends up costing more.) You can pick a few sites, enter the amount of money you want to transfer, and see what the cost will be.

Set an alert for the rate you want

At first, I was obsessively tracking the exchange rate by refreshing the web page probably 20 times per day. But eventually, I got smarter and set up an email alert for the rate you want. (You can enter your email address at the bottom of this page to get alerted when the exchange rate reaches a threshold you set.)

The exchange rate ranged from 19.44 to 20.68 in this month

I picked a rate of 20.5 pesos per dollar, which was an OK rate for the time period when we needed to move money. We only had a month to watch for a good rate, so we couldn’t hold out for something like the phenomenal 25-plus rates from March and April 2020. You can look at where the rate has been for the past month or six months and figure out what rate you want.

The exchange rate hadn’t reached 20.5, and our closing date for the apartment was approaching. So, I thought I would have to settle for a rate around 19.8. But some of the documentation we needed from the Mexican government to purchase the apartment wasn’t ready, so we had to postpone our trip. But I had a couple more weeks to watch the exchange rate and ended up with an exchange rate of 20.52. (By sheer luck, when we transferred money for the 20% down payment in March, we hit on a 21.17 exchange rate, which was among the best rates in the past year.)

Be patient, but not greedy

Of course, watching the exchange rate feels a little like gambling. I had decided ahead of time that I’d move money at 20.5. But once the rate got there, I questioned myself. What if the rate kept climbing, and I locked in at 20.5 when I could have gotten 21 or higher? Was I being patient, or greedy? In the end, locking in at 20.5 turned out to be the right choice. That was the best rate it reached in the month when we could move money.

Move your dollars to your transfer bank early

One thing almost made me miss out on the exchange rate I wanted. When you send money to Wise via wire transfer, they lock in your rate for what they consider enough time for your bank to send the money to them. There’s more time built in for weekends. In our case, they locked in our rate for 24 hours. But my bank (Ally) can take more than 24 hours to complete a wire transfer. You have to request a transfer before 3 pm on a weekday, they review the request later in the day, and then send the money by 6 pm the following business day. So, I spent the day obsessively watching the accounts to see if the transfer went through and checking the exchange rate to see if it was getting worse.

I figured out later that I could have saved myself some stress. You can hold money at Wise in multiple currencies. So, I could have transferred the money to Wise in dollars and just let it sit there. Then, when the rate was good, and I wanted to move money, I could transfer it right away. Once your money is in your Wise account, rolling it between accounts only takes seconds. And when we made the final payment on the apartment, transferring money from pesos in Wise to pesos in the seller’s account only took a couple of hours. That meant we could get the keys to the apartment that night, not a couple of days later.

Look into what your bank allows for international wire transfers

Here’s something to know about international wire transfers—not all banks treat them the same. We have some money with Citizen’s Bank, and they allow international transfers only in person. The closest branch to us is about 30 minutes away, so that’s not super-convenient. Ally doesn’t allow international transfers at all. But it works with Wise, because Wise uses a Wells Fargo account for US transfers, so you are effectively doing a domestic wire transfer.

We don’t need to follow the exchange rate as much now that we’ve finalized the purchase. But I still keep an eye on it. If the dollar is strong, we can move a few months’ worth of living expenses into pesos so that money will go further when we need it. It’s an easy way to earn an extra 5% or so with almost no effort.

How we purchased the Mexico City apartment

You’ve probably seen YouTube videos and blog posts explaining how inexpensive it is to live in Mexico. But if you want to buy your own place and you want that place to be in a desirable location, you should prepare yourself for sticker shock.

Don’t get me wrong: Most areas of Mexico are less expensive than most places in the United States, as promised. And I’m sure you can find properties in Mexico that cost $150,000 or so. But you won’t see prices like that in Mexico City, at least not in any of the more desirable neighborhoods.

We know this because we recently purchased a new apartment in a newly-built building in our favorite part of Mexico City, called Roma Norte. The list price was a bit north of $250,000, but after figuring in all the taxes and other fees, the final cost was closer to $280,000. That was more than we wanted to spend. More importantly, it was more money than we had. A lot more. So how on earth did can afford this purchase?

The short answer is home equity.

But the long answer involves a lifetime of home ownership with years of ups and downs, a few well-timed moves, and just basic common sense when it comes to money. Mostly on my wife’s part, since she handles our finances.

So I’ll start with the homeownership bit and explain how we got here. Not including the Mexico City apartment, we’ve owned four homes.

We purchased our first home in 1998, in Phoenix, Arizona, ahead of the birth of our first child for $99,000. We sold that home about a year and a half later, for $113,000, and moved back to the Boston area to be closer to family.

Our first home, in Phoenix, Arizona
Our first home, in Phoenix, Arizona

We bought our second home, a small Cape, in Dedham, Massachusetts, the town I had grown up in outside of Boston, in early 2000. It was no bigger than our first home but because of its location, it was worth over twice as much. We paid $225,000. And then we sold it for $265,000 less than two years later.

Our second home, in Dedham, Massachusetts
Our second home, in Dedham, Massachusetts

We bought our third house, also in Dedham, in early 2002 so we had enough room for our second child. This was a bigger home, a 1600 square foot Colonial, and it was on a nice curved corner lot with what felt like a lot of space for the area. We could only afford it because it was a neglected fixer-upper, and we paid $365,000 for it. And over the course of the next 15 years, we performed an incredible number of upgrades and improvements, until we finally moved in mid-2017. Thanks to the explosive real estate market in the area, we received $635,000 for the home, and we pocketed about $350,000 when all was said and done.

Our third home, in Dedham, Massachusetts
Our third home, in Dedham, Massachusetts

From there, we moved into a large family home in Lower Macungie, Pennsylvania with more land. But because of its rural location, this much nicer home cost far less than our previous one, at $365,000. It also needed upgrades and improvements because of neglect, and so we made a decision I still sort-of regret today and got a small ($50,000) mortgage with a small equity line instead of paying cash. We wanted to make a lot of improvements upfront and felt that having cash made sense.

Our fourth home, in Lower Macungie, Pennsylvania
Our fourth home, in Lower Macungie, Pennsylvania

The next thing to understand is our history with home equity. Throughout the 2000s, I was paid well and we didn’t have much debt beyond the house and shorter-term, 0 percent car loans. We had a home equity line of credit on the second Dedham home which we never needed or touched, figuring it might act as a form of emergency fund if I lost my job or there was a medical disaster.

But then the 2008 financial crisis hit. And this line of credit was suddenly taken away because so many of the bank’s customers had simply taken all the money from their own lines of credit. Inquiring about this, we were told not to worry, and that if we still qualified, we could simply reapply for the line of credit and it would be returned. And so we did so, waiting over a period of months to hear back. When we did, we were told, sorry, the bank wasn’t doing lines of credit anymore because of the ongoing crisis. The money was gone.

This bothered us on a number of levels, but mostly because we had done the right thing and not drained the line of credit just in case. And that impacted what we did years later when the COVID-19 pandemic hit in 2020. Thanks to the uncertainty and our prior experience, my wife and I decided to take $50,000 out of our equity line and put it in a cash-accessible savings account, just in case, paying hundreds of dollars in interest for the privilege.

Of course, by 2020-21, we were reevaluating things like so many others were. In our mid-50s and with our two kids in colleges we were paying for, we were a long way from retirement—whatever that even means—and had long planned for a future in which we might split our time between two places, one of which we had hoped would be international. We had spent the previous 15 years or more visiting Europe for at least a month each year, and were obviously heading in that direction. But with the pandemic preventing travel to Europe, I started researching other destinations. And discovered Mexico.

We will write more about our sudden shift to Mexico elsewhere, but the two of us visited Mexico City and some other locations in Mexico in 2021, and on the second trip, our kids joined us—in Mexico City—so we could share what we had found. We were definitely leaning in that direction by then. We just needed to find the right neighborhood.

Concurrently to this, my wife walked into my home office one day in late 2021 and jokingly mentioned that the bank that holds our equity line of credit had written to inform us we were eligible for a much higher line of credit—$300,000—than we had had at the time. This was the type of thing we’d normally ignore, and we kind of laughed it off. But sitting there, thinking about it, a thought occurred. And I told Stephanie we should apply. Who knows? Maybe we’d find a place sooner rather than later, and this line of credit would enable us to pull the trigger.

And so we did. And were approved. And in January 2022, we visited Mexico City for a third time, staying at an Airbnb in Roma Norte. We fell in love with the neighborhood and realized we had found the right place. And then, on the last day of that trip, we walked around a corner and our lives changed: the apartment that we ended up buying was having an open house. We had walked by it most days on that trip and hadn’t even realized it was for sale.

Our apartment building in Roma Norte, Mexico City

Thanks to our equity line increase, we could afford it. And we know that our current house is worth enough now that if we sold it, we would still walk away with some cash after paying off the credit line. This is not the type of risk we normally would take. But it was the right home in the right place at the almost-right time, and being able to do it now just put it over the top. Had we paid for our current home with cash, we would never have gotten a home equity line. And had we not increased the amount of that credit line, we could never have purchased this place. It simply would have been another case of what-if.

We still don’t know whether this will work out over time, of course. And we still have lots of money to spend, since the apartment is empty and needs to be furnished. There are lots of things to learn, about the bills we must pay, and when, and to whom, and how. We’re not ready to move yet and so the next few years will be interesting. But I’m glad we accepted this risk and went for it. Whatever happens, I’ll always be happy about that.