Finance for Foreign non-residents

Finance for Foreign-non residents

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I am seeing many changes in Australian in the lending criteria and conditions for the foreign non-resident segment. These changes are across lenders, albeit specifically the major lenders (ANZ, CBA, Westpac).

This blog is specifically for foreign non-residents and will provide you with an update on recent policy changes and give you comfort that there are still competitive finance packages available for foreign non-residents (otherwise known as foreign person) who are looking to purchase a new property.

Definition

Firstly, a definition of foreign person as per the Foreign Investment Review Board (FIRB)

Foreign person means:
a. an individual not ordinarily resident in Australia; or
b. a corporation in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
c. a corporation in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
d. the trustee of a trust in which an individual not ordinarily resident in Australia, a foreign corporation or a foreign government holds a substantial interest; or
e. the trustee of a trust in which 2 or more persons, each of whom is an individual not ordinarily resident in Australia, a foreign corporation or a foreign government, hold an aggregate substantial interest; or
f. a foreign government; or
g. any other person, or any other person that meets the conditions, prescribed by the regulations.

Australian citizens who are not currently residing in Australia and who may or may not be paying tax in Australia are not classified as foreign non-resident rather lenders will classify this segment as either non-residents or expatriates.

Today’s blog is dedicated to foreign non-residents.

Who are the lenders?

Whilst this could be referred to as ‘moving feast’, based on my research, there are currently 5 lenders that have dedicated finance packages and credit teams for the foreign non-resident segment.

These lenders are: Citibank, La Trobe Financial, NAB, Resimac and St George.

What are the key criteria for lending to foreign non-residents?

There are several aspects that form part of the credit assessment process for all lenders:
1. Verification of identity
2. Validation of income
3. Loan to valuation ratio (LVR)
4. Countries / currency
5. Treatment of foreign income

Verification of identity

This is an area of increased emphasis and lenders will require:
a. Independently certified identification document
b. Completed certifiers declaration
c. Certifiers to be acceptable in terms of lenders acceptable certifier list. This list is quite broad however Notary Public is an acceptable certifier.

Validation of income

In addition to the standard provision of 2 payslips, 3-months bank statements that validate payslip information and consistency of salary will be sought.

Where the borrower has foreign income and is not a citizen of the foreign country, evidence of the ability to reside and work within the foreign country is required i.e. copy of the relevant visas/permits.

Loan to valuation ration (LVR)

Loan to valuation ratio (LVR) varies per lender and is also dependent on loan amount. As a guide, use a loan to valuation ratio of 70% and maximum loan amount of $1,000,000.

An external valuation is required for the property to be purchased.

Acceptable countries / currency

Most countries and the respective currency are accepted by at least one lender. Sanctioned countries and Sanctioned regimes are understandably excluded from the acceptable country list.

Treatment of income

All foreign income is converted to AUD and depending on the lender, the AUD equivalent income is shaved (sensitised) by between 10% and 20% for assessment purposes.

Rental income to be received from new investment property is included at between 80% and 100% of gross rental…the % used is dependent on the lender.

Gross income is normally assessed using Australian taxation rates.

Loan packages

A full range of finance packages are available i.e.:
1. Fixed rate and variable rate
2. Interest only and principal and interest
3. Split loans
4. Additional features i.e. 100% offset account
5. Pre-approvals / off the plan purchases
Note: cash-out and line of credit packages are not available.

Summary

1. The current lending environment for foreign non-residents is complicated and can best be described as fluid.
2. There are competitive loan packages available for foreign non-residents.
3. These loan packages include value-add options

Please do make contact with me on 1300 204 013 or gayle@stapletonpacific.com to discuss your property aspirations.