We at Thyme Financial had never received an inquiry from non-resident borrowers for residential property until this week.
So you’re a non-resident borrower who, some time ago, put down a deposit for an off-the-plan apartment. The project is coming to completion and armed with an approval-in-principle you go back to your bank and…well, they can’t help you.
It would be fair to say that we – and I’m sure other brokers and lenders – have been inundated with inquiries from people that are seriously thinking about walking away from their deposits as they cannot get the funding that they thought they had.
Here’s are the facts:
- Three of the four major lenders in Australia have announced that they will no longer lend to non-residents with foreign sources of income to support servicing of the loan.
- The fourth will only accept foreign sourced income from a reputable employer and that has to be independently verified. So if you’re a company director or otherwise self employed, you’re out.
- The minor lenders didn’t lend to non-residents anyway so they’re out.
- Most financial warehouses are funded by the four major banks. The one’s that we contacted who used to lend to non-residents were afraid that they would lose their funding if they continued to do so. So they’re out
- There are a few private companies with access to private money who are quoting 11.5% at 50% LVR with 2% establishment fee. Borrowers have said they would prefer to forfeit their deposits rather than pay those rates. This is understandable as it makes the whole transaction uneconomic for the borrower (if they were buying the apartments as an investment).
- There are a few legal offices and SMSF funds that have said they’re willing to look at lending at 7-8% with some up front costs. This is on a case-by case basis so you need to be assessed to see if you’re suitable.
Many people in this predicament will not be able to read this article as they rely on brokers that can speak their language. We are told that the changes outlined above will mean that those brokers will lose up to 95% of their business throughput.
The conclusion is that you can still borrow if you have non-resident income but the following applies:
- There are very few lenders willing to do so (at the moment).
- Those that do will only go to a maximum 50% LVR.
- The yield on the investment must comfortably cover your repayments so that they don’t have to rely on your foreign sourced income.
- The rates they charge will be somewhere between 7.5% – 12%. With a 2% up front and other large fees for valuations, legal services etc. We see those rates climbing as the demand for this very scarce funding grows.
If you call us (on the numbers below) please be patient as our lines may be busy. Better still, contact us via our website.