Singapore Expats’ Success Buying An Investment Property In Box Hill
Overseas Income Investment Loan Case Study
Clients at a glance
Executive Summary
Mortgage Corp assisted a couple, Singaporean permanent residents, living and working in Melbourne purchase an investment property in Box Hill with a better interest rate than the big 4 banks could offer. Despite one of their incomes being self-employed foreign income from Singapore they were able to secure an excellent investment property loan with an increased borrowing power of $200,000.
Client Overview
Client: Maryanne and Tim, expats from Singapore, new Clients of Mortgage Corp
Marital status: married with 2 children at school age
Income: double income household approx. $200k
Occupation: IT Engineer (husband), Marketing Consultant (wife)
Suburb of home: Glen Waverley, 3150 Victoria
Suburb of investment property: Box Hill, 3128 Victoria
Objective: buy an investment property with a future development opportunity
Results: borrowed an extra $200k through Mortgage Corp and reduced their interest rate by 0.3%-0.4% compared to a Big 4 bank, to allow them to secure a fantastic investment opportunity
Background
Maryanne and Tim were expats from Singapore, transferred to Australia as permanent residents because of Tim’s job with a large international IT company. Maryanne was working as a self-employed marketing consultant out of Singapore. Her income was derived from Singapore but they were now living in Australia.
With the big four banks and major lenders in Australia tightening up on loans with foreign income in 2016 Maryanne and Tim thought their options may be limited. They were looking at buying an investment property, when Maryanne read all the Google reviews about Mortgage Corp and felt compelled to call us.
During our free strategy session, we looked at Kew, Box Hill and Doncaster as possible investment locations, based on Maryanne and Tim’s goals and these suburbs’ development opportunities.
The Challenges
- The fact Maryanne was self-employed with mainly foreign income meant that most banks were not willing to take her income into account in calculating her borrowing power
- The banks that would take into account her income mostly provided uncompetitive rates
- Maryanne had already signed the contract and needed to have enough finance to settle within 8 weeks
Objectives
- Finance a great investment opportunity
- Get a discounted interest rate
- Ensure fast loan approval to meet the settlement date
The Solution
After we first spoke to Maryanne, we started the pre-approval process to figure out how much they could borrow. We noticed however that only two banks at the time would accept her income in the loan application. One of those lenders had a very competitive offer, though would take longer to approve the loan as that particular lender was under the pump given they were very popular with overseas borrowers.
Within a few days, Maryanne came back to us and said she had found a great development opportunity in Box Hill and had already made an offer for $890,000, (sensibly) with a “subject to finance” clause.
We had recommended Box Hill because it has appealed to a lot of new immigrants and overseas buyers recently with developments on apartments and townhouses being the main focus. We ran a few further reports on the property in Box Hill and were happy with what we saw. This area offered excellent amenities, with shops, education facilities, public transport and was a reasonable distance to the Melbourne CBD.
Based on the property data, the average Box Hill house price in 2015 was approximately $1 million and unit sales ranged from $340k to $600k. The most surprising fact however was that in 2016 Box Hill experienced a 43% growth in capital value on houses, however units rose by only 4.6%, which meant there was a lot of growth potential for the land Maryanne and Tim had purchased.
Because her purchase was subject to finance, this meant that Maryanne would be able to cancel the contract without any significant penalties if she wasn’t able to get enough financing.
Now Maryanne felt pressured by the looming settlement date as she didn’t want to lose the development opportunity. She knew the loan approval was going to take a little longer than normal as we previously advised her, so she decided to try a bank branch.
She went to ANZ and the branch manager said he could get her the required loan amount and a quick turnaround. They did approve her loan quickly, but only took into account her husband’s Australian income and didn’t use her overseas income to work out their borrowing power. As a result, they were about $200,000 short of what they had wanted borrow.
Maryanne came back to Mortgage Corp and we applied for a greater amount of finance, as well as a more competitive rate. We explained again it would take a little more time due to the large number loans the lender was processing at the time, though it actually ended up only taking an extra 3-4 days to get approved.
This meant that Maryanne and her husband were able to borrow an additional $200,000, meaning that they didn’t have to put in as much of their own cash into the purchase. This meant they could put this back into their existing home loan.
Sources: RP Data 2017
Results
- Borrowed an extra $200,000 by finding a second tier lender that would take into account overseas self-employment income
- Saved more than $250 per month in interest against the same loan amount, improving cash flow
- Secured a promising investment development opportunity
We also managed to get her a more competitive interest rate – about 0.3-0.4% lower than what ANZ had offered. This meant a saving of about $250 plus per month in interest. Given the property she bought was purely for a development opportunity to be realised in a few years’ time, and its rental income was quite low, this saving in interest would also help her cash flow over the next few years.
Note: for privacy reasons, names used in this case study are not real client names.
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