One decision that Singaporean investors get stuck on while investing in Australia is whether to finance their purchase with a loan from a local bank or an Australian bank.
Some buyers think that an Australian bank will be more troublesome to deal with or that they will get charged more, however this could not be further from the truth!
Foreign investment is closely regulated
The FIRB (Foreign Review Investment Board) is an Australian governmental organisation which monitors all foreign purchases. Under their guidelines, all foreign investors need to apply for FIRB approval before making any purchase. Investors are also only allowed to buy a property which is newly built or a vacant land for the purpose of constructing on it.
If you are serious about investing in Australia then you can also go ahead and apply for a FIRB pre-approval which will make your purchase process faster.
Australian banks will let you borrow more
Did you know that Australian banks will actually let you borrow more than Singaporean banks, allowing you to get a loan of up to 80% of the property value? This means that you can put down a smaller deposit and make your purchase faster.
Australia and Singapore also enjoy a long history of trading and have formal trading agreements in place, not to mention that some banks favour Singaporean investors and will be happy to do business with them.
What are the features of a non-resident mortgage?
Typically, your minimum loan size will have to be $100,000 AUD with no maximum amount. Interest only packages are available however these are only for 15 years at most and fixed rate packages can go for 12 years, and the longest loan period for non-residents would be 30 years. Banks will allow you extra repayment, redraw and 100% offset facilities for variable rate loans.
An offset account is a great way to reduce your interest payable every month. It works in such a way that it allows you to set up one loan account and one linked offset account. Your offset account will not earn any interest however the bank will minus that amount from the total loan balance to calculate your loan interest. Since savings accounts usually have lower interest rates than your mortgage rates anyway, this feature will allow you save on every repayment.
How much is the interest rate of an Australian mortgage?
Despite what you may think, it is possible to get the same interest rates as an Australian person if you apply with the right bank. Currently the best variable rate for non-residents being 4.99%, the best 3 year fixed interest rate is 4.95% and best 5 year interest rate is 5.49%.
(Interest rates subject to change according to bank policies or the cash rate of the Reserve Bank of Australia so check with your bank for the latest figures)
All banks are different
All Australian banks have their own set of guidelines and lending policies, and not all of them work with non-residents. You should try to find one who specialises in foreign mortgages since they will have the experience to assess your situation properly.
You may also have to think about your financial or employment situation since some lenders do not like to take risks on their loans.
Which documents will you need to submit?
In order to prove your income and savings banks will usually ask to see one or of two of these documents: your two most recent payslips, tax returns from the last year, an employment letter or your bank statements from the last three months.
If you are self-employed you might have to show your tax returns from the last two years.
Since every bank is different, ask your banker or broker about the document requirements so that you can avoid unnecessary delays caused by missing papers.
All documents should be in English
In case you have any documents which are not in English, make sure they are all translated before you submit your loan application. You can get them translated by an interpreter from the local Australian consulate or any recognised and certified organisation.
You cannot borrow using foreign real estate
Unfortunately you cannot get a loan in Australia by putting up a property in another country as security. If this is your only option, then you would have to borrow against that property in your own country and then bring the funds to Australia.
Banking packages are available
Most Australian banks are ready to offer banking packages which are known as Professional Packages or Pro Packs. To get this, you will have to pay an annual fee of about $300 to $400 after which you will be eligible for interest rate discounts, waived application fees, waived monthly account keeping fees or even a free credit card with rewards and discount on insurance offers.
Even though not all Australian banks cater to non-residents, it is still possible to find a lender who can offer you the best rates on your loan. Remember that in the end you are taking your investment strategy one step further with this purchase.
Home Loan Experts are an award winning mortgage broking company from Australia that specialises in non resident mortgages and has a strong history of working with Singaporean clients.