How to choose the right lender?
1. Who is your lender?
Who is the lender, where are the funds coming from, does the lender and its shareholders have a track record of writing residential loans in Australia, and are they reliable? There are a number of lenders backed by small investors who have limited funds available for FIRB buyers. The worst situation is where your lender runs out of money before your settlement
2. What levels of customer service does the lender provide?
Interactions with your lender do not stop after settlement. You will need to speak to them if interest rates change, if you are thinking of borrowing for additional property purchase, or if there are any changes in your circumstances. You will be dealing with your lender for the life of your loan, so you’d better make sure they provide good customer service.
Make sure the lender you are considering has the following customer service capacity: they have staff that can walk you through the application, they have Mandarin capabilities and documents (including legal documents), and they are easy to reach via multiple contact points and quick to respond to any questions.
3. How fast can they process your application?
In Australia, developers usually give a 2 week notice before the settlement is due, so you don’t have much time to arrange a loan. So make sure your lender has quick and efficient application processing procedures, such as an online portal where you can upload documents. Usually, a good lender will be able to formally approve your loan within 1 week. Even better, make sure that your lender can provide a “quick and easy” pre-approval 24-48 hours after you register interest. You don’t want to waste valuable time gathering documents and filling out forms!
There are some lenders who have very poor processes that are manual, are not responsive, or who don’t have enough staff on the ground, which can lead to wait times of 3+ weeks or even months. You could be at risk of losing your deposit if you are unable to find financing on time, so make sure you find a lender with a reliable track record of responding on time.
4. Will they lend to you if you are self-employed?
Most loan products for foreign buyers are only available for employees with stable income, but what if you are self-employed and can’t show evidence of employment?
Many lenders have limited understanding of how the Chinese self-employed manage and report their income. Therefore, you should ask carefully about whether this lender will be able to assess your application and take into consideration things such as differences in bank account statements and tax returns. If you are not a typical wage earner, make sure you go to a lender who has a good understanding of the Chinese income system and has a self-employed friendly application process.
5. How strict are their requirements?
There are strict hurdles that lenders can put in place that make it difficult to reach the end of the process.
For example, some lenders require you to deposit $500k-$1m for a period of up to 6 months, or require you to be a VIP customer. Some lenders will charge high interest rates of 8-10% and limit your loan value to only 40-50% of the property. You need to also be careful about hidden fees (the most important ones are valuation fees and loan application fees) as these can add up to a large portion of the total cost that you end up paying.