Hi,
I’m after some comments and explanations about the options, and the pros and cons of each, for financing an IP in NZ for an Australian resident (ie. me). While I realise there are mortgage brokers here who can help me do this, at this point I’m just after information on how it works.
As a guideline, I am considering investing using an Australian family or hybrid trust and will likely look for a mixture of -CF and +CF properties (if I can find any), but would expect the overall cash situation to be -ve. Initially I will have sufficient funds to invest so that borrowing shouldn’t be a problem, plus I have a reasonably good income, a good credit record, and own a PPoR with no mortgage.
Some questions I have are:
1. Would it be better to obtain loans from a financial institution in NZ or in Australia? The issues I can see are that if I borrow in NZ, there would be regular payments (assuming overall -CF) from Australia to NZ, those being subject to exchange rate variations and international transfer fees. If I borrow in Australia, there’d be the one-off transfer to NZ at the time of buying but then repayments would be totally in Australia (so interest payments would not be going international and attracting fees), and I gather interest rates are a bit lower in Australia. Would an Australian financial institution accept a NZ property as security or would I be forced to use my PPoR as security – considering that I’d like to gradually invest in a number of properties there with the usual 20% deposit at most?
2. I realise I’d need to have an accountant, lawyer (or other conveyancer), and bank account in NZ, but I saw mention somewhere else here of investing through a NZ-based trust rather than an Australian one. What are the issues with that?
3. If the answer to #1 is from an Australian institution, then how would it actually work at the time of buying? By this I mean that if I wanted to be able to make an offer not subject to finance (ie. preapproved), when I find something and actually have to hand over the cash (at least the deposit), what form would that take? Would I have some sort of deposit bond or bank cheque or what? Likewise at the time of settlement. And how would they obtain a valuation on the property?
So far I’ve only ever bought my PPoR here in Sydney, and with that I used cash for the deposit and bank cheques for settlement (a few of them, since there were three joint vendors). I’m just wondering how all this normally works when investing overseas.
All info greatly appreciated!
[juggle]
GP
Hi GP,
Unfortunately Australian-lending institutions will not except NZ property as security,You have Two options,
(1) Purchase the NZ properties outright with finance raised from Australian lenders using any available equity you may have,As you are probably aware, If you decide to implement this method the amount of NZ IP’s you acquire will be limited by the amount of finance you can raise against your Australian assets,
(2) Use the equity available here in OZ to fund multiple 20% deposits with NZ lending institutions, 80/20 lending,
This method will enable you to purchase more property using OPM (other people’s money)
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Steven,
Thanks for the reply.
Looks like borrowing in NZ is going to be the way to go.
Although that does raise the question of what happens if they want security beyond the IP itself (I assume that a NZ lender would not accept my Australian PPoR as security either) and, for overall -ve cash flow, whether they’d see servicibility problems with me not earning income in NZ – only in Australia.
GP
Hey GP,
I also believe that borrowing in NZ is the way to go although you can do it here but Im a bit hesitant – too many scammers.
They shouldn’t see any servicibility problems with you not earning income in NZ – only in Australia. This is absolutely fine. All you need to do is fax your lender some statements from your employer and you should be right to go.
Also, I find it rare that your lneder would want more than the IP as security. As long as you provide some payslips from your job, then all they should take is the IP. See how you go with your lender (I assume you’ve been communicating with one) in NZ. If you have difficulty, let me know and I can refer you to my lender in NZ. He’s a very nice, honest and hard-working guy but first see how you go.
Take care and God Bless.
Kind Regards,
George.“If You never never ask, you’ll never never know”
George,
Thanks for the info.
I assume you’ve been communicating with oneNot at this stage. I guess I’ll probably look for a mortgage broker in NZ when I’m ready, but right now I’m just gathering info.
I can refer you to my lender in NZA broker?
What part of the country is he in?
Cheers,
GPYes he’s a broker for Wizard and he’s in the South – but he does finance for all NZ. Let me know when you’re ready to go ahead.
Kind Regards,
George.“If You never never ask, you’ll never never know”
Originally posted by geo:Hey GP,
I also believe that borrowing in NZ is the way to go although you can do it here but Im a bit hesitant – too many scammers.
They shouldn’t see any servicibility problems with you not earning income in NZ – only in Australia. This is absolutely fine. All you need to do is fax your lender some statements from your employer and you should be right to go.
Also, I find it rare that your lneder would want more than the IP as security. As long as you provide some payslips from your job, then all they should take is the IP.
The application process is more involved than faxing some statements from your employer
Geo, NZ lenders will look at all GPs commitments, Keep in mind GP will be drawing equity from OZ assets to use as a deposit with NZ Lenders,
Any australian borrowings will have an effect on his levell of serviceability with any NZ lender,Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
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