I was just looking at different interest rates overseas and noticed many countries as low as 0-1%. I also noticed th bank of America offering you could lock in a 30 year fixed rate loan at around 4%.
That is an offer I would be happy to lock in I reckon for my family home.
As an Australian are we allowed to borrow from overseas banks to fund a purchase of our home in Australia or investment properties?
The cost of the international money transfer each month to pay the loan would have to be factored in as well of course.
Is there any reasons why we can’t make use of cheap overseas rates?
Swiss banks are offering less than 1 percent. It’s crazy!
I want a piece if it!
But I’m assuming there are many reasons why we can’t do it or everybody would surely do it!
Cheers Grant
Just ask about the westpac experience in the 80’s when our rates were 15%+, OS rates appeared extremely attractive. Then the @rse fell out of the aud/exchange rate became less attractive & borrowers found they owed twice as much as they borrowed. Hmm……. Not so cheap anymore.
I have just financed a deal for an Australian client buying in France at 4.25% fixed for 25 years but you wont find any overseas lender take a mortgage your Australian security.
There are many other ways around it but as SNM has mentioned the Exchange Risk would kill you over time.
Unless you decide to invest in overseas property you need to accept the RBA willl govern your likely rate for the forseable future.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
I am confused. If you could get a US lender on a US house and with Australia's exchange rate both favourable now and for the foresable future where is the issue?
At this moment its a triple whammy. US property is cheap, lending is cheap and if the asussie dollar either rises further against the US or even retains parity with AUD then that is in your favour when you sell as well.
No doubt I am missing something obvious but I for one would look very closely as landing a US mortgage originating from the US at cheap set in stone rates. It seems like real estate nirvana over there with such a congruence of factors in our favour. The obvious pitfalls might well be worth the risk.
Andrew
PropertyNowIt's one thing to look at buying OS property with foreign currency (assuming you're servicing it with the same foreign currency) but an entirely different situation buying Australian property with it (or more specifically servicing USD debt with Australian Dollars). Like SNM says, with the AUD at historically high levels the main risk is that the currency drops significant value in relation to the USD like it did after it was floated in the 80's.
itsandrew
Go as far as you can see and you will see further.
Ok so how easy or hard is it then as an australian to actually get – for example – finance from a bank in the USA and purchase a property in the USA as well? What are the rules and regulations potentially holding me back
As I’m looking at the stats I can see rental yields are quite high in comparison to the finance cost at 4.5% that I can lock in for 30 years giving me a positive cash flow property and hence not at risk of currency changes.
2nd question is there any good data available online that can show me a historical view say of the last 20 or 30 years of rental yields and occupancy rates for the cities of the USA?
Cheers Grant
Good luck on finding a US Bank to finance a deal for you in the current climate.
I am currently in the UK sourcing some UK and European properties for my Qld investors.
We settled a deal In France for an Australian last week at an 80% lvr at 4.25% variable repayable in Euro's.
The property is leased for the next 9 years and comes with immediate 20% equitty from day 1 .Breakeven in year 1 and then + cash flow from there on in.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Hi Grant,
I would recommend you have a look through the 'overseas deals' sub forum https://www.propertyinvesting.com/forums/property-investing/overseas-deals This subject comes up periodically over there. Alternatively you could do an advanced search on US finance.
From what I've read much of the available finance is through hard money lenders on shorter terms eg. 5 years, and on higher interest rates eg. 7% and low lvr's, but some are claiming bank lends are available.
Also you may have seen the AUD drop under parity this week http://www.xe.com/currencycharts/?from=AUD&to=USD&view=1M it got as low as 97c
Andrew
itsandrew
Go as far as you can see and you will see further.
It sounds like a good deal to me too. Even with currency fluctuations you could come out on top.
For you to start losing money on a 700K loan the exchange rate would need to fall to around A$0.52 on an interest rate of 4% if you include approximated fees and assume our rates stay around 7%.
Also if you are smart about paying back more money when rates are good then you should do well. If our interest rates however fall along with a fall in the dollar then you would start to lose money much sooner.
If anyone knows of US banks loaning to individuals outside the US for residential property I would also like to know. I beleive some of the smaller banks may consider it. Hubby and I have to consider all options as we have lost an income to have one of us stay at home with the kids for a few years.
JM
Hi Jm
Sorry i think you have totally missed the point on Foreign Currency lending.
Firstly you will never find any smaller US Banking lender lend in Australia so would even waste time on that one.
They dont even have enough funds to make loans in their own Country so outside US in out of the question for a variety of other reasons including licensing.Secondly assume the AUS drops from parity to say 90 cents in the USD your loan repayment has just gone up by 10 percent.
A further drop to 80 cents means another 10 percent increase.The risk is horrendous and the cost of hedging makes in totally incompetitive.
The Treasury Departments of all the major Banks spend all of their time doing it 24 hours a day and still claim their cost of funding is increasing so you have no chance is coming out on top.
Sorry to appear negative but you really are playing a very dangerous game.
I watched in the UK at the end of the 80's so many clients taking out FC loans fixed for 25 years with Bear Stearns at 4.25% when UK rates were a lot higher. Unfortunately BS are no long with us and most clients ended up loosing their home and all belongings some years later.Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
No matter what has gone before or what you say Richard, some people just won’t listen as ‘it won’t happen to me!’ but they will be the first in the queue for a bailout.
Hello Richard
I think I see serious flaws in your maths in relation to your respponse to Jim ( above )
A 10% increase in the repayment of a loan interest due to a change in exchange rate does not equate to a 10% interest rate hike. I may be wrong in my maths also but I image it would be equating to half to one percent. The 10% is being levied on an interest payment of 4% and 10% of 4% is less than half of one percent. I did this in my head and bow to your greater knowledge of overseas lending etc…but i still think you are either in error or at last making a statement that can most likely be taken erroneously by Jim and others.
The stats still look amazingly good on a $50k US property ( given the usual due diligence ) And don't forget authors like Harry Dent are predicting a 50% drop in Aussie property within 2 years. Now even if Harry is way out…where does one put ones money?
Jim, I am not saying investing in the US is without perils but I am doing it and you should get a lot of difffering opinions ( including the one Richard gave as he sounds very authoritative ) before making a decision.
Andrew
PropertyNow Real estate salesFurther to my last post…
$50,000 lend on US property in Australians dollars at 4%= $2,000 per year.
Interest rate fluctuates so Aussie dollar falls against USD by 10%
It then takes $2200 a year in aussie dollars to service the same loan, which is a $200 a year increase. $200 on a $50k loan is about o.4 of one percent
Again, happy to be told I am wrong here?
Andrew
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