Settle in Australia with your own home
More kiwis are returning home to New Zealand and yet, there are still many who want to settle across the ditch in Australia. These kiwis will be regarded as overseas clients as they are earning income in a foreign country. This case study will focus on a couple who work and live in Australia and want to purchase a new home. This case study will illustrate the general requirements for overseas citizens working and living in Australia who want to borrow from New Zealand. In this scenario, the couple are currently renting in Australia and own a rental property in Auckland, which is the security they would like to use for the new loan.
After speaking with the client about their situation, it was clear this case would be a tough assignment. The couple want to increase their loan on their rental property, which will be used
as a deposit to purchase their owner-occupied home in Australia. The remaining amount will be funded in Australia. Hence, there is an increase in their overall loan in New Zealand and a new loan will be taken in Australia. Their existing bank had already denied their request; hence the loan will need to be refinanced to a bank that can provide the additional funds.
The next hurdle is their combined income. At the time of this case, most banks only took overseas income from those who hold a New Zealand Citizenship or Permanent Residency. Also, their net overseas income is scaled at 70%. This made it difficult to prove to the banks they could afford the new loan, and prove they can manage the new loan in Australia.
The usual scenario would be to get a loan through a first-tier lender such as ASB, ANZ, WestPac, etc. If this is not fruitful, the next place would be a second-tier lender such as DBR, RESIMAC, etc. So, what is the difference between the two? Second-tier lenders take high risk clients, those who are rejected from first-tier lenders due to income or increased debt levels. As a result, they charge a higher interest rate, usually principal and interest, as they are taking a higher risk.
For these clients, second-tier lender was not suitable as they would not be able to afford the repayments nor will they be able to refinance the loan a year later. Another issue is their LVR; second-tier lenders lend only 50% of the security value compared to first-tier lenders. Second-tier lenders rely more on asset lending and therefore those with highly valued assets are far more likely to benefit from second-tier lenders. The clients in this scenario own only one property, which is not highly valued and will not provide them the funds they want if they were to go to a second-tier lender.
Since second-tier lenders were out of the picture our only option was to apply to each first-tier lender that was open to overseas income earners. Each bank had their own issue with the application; funds going to Australia, low income after scaling, and the potential new loan in Australia. After many phone calls and emails, we got a letter of offer from SBS Bank. SBS Bank had different policies for overseas NZ citizens. Specifically, their income scaling was less compared to other banks and they required a Power of Attorney (POA) for the clients whilst they resided overseas. POA is a declaration by the clients which will allow someone else to act on their behalf. In this case, the bank needed someone in NZ who would act on their behalf while they were in Australia. Once this was completed and all conditions were satisfied they settled soon after.
In summary, it is possible to get a loan in NZ as an overseas income earner. The main hurdles are the income scaling policy, POA depending on which bank, level of debt and whether the funds are to be transferred overseas. In this scenario, a portion of the funds were transferred and the bank allowed it. Restrictions in NZ will get stricter, but there are still scenarios that can allow overseas income earners gain an approval for a loan.