Blue Lotus Loans

Financing your new Australian home

Financing your new Australian home

Australia is a beautiful place to live and provides great investment opportunities. When it comes to arranging finance to purchase property however, many overseas buyers don’t really understand the process of getting a home loan in Australia. You need to be careful because the processes in Australia are not the same as those in other countries!

Over the last 24 months in particular, the Australian lending environment has gone through significant changes. Such changes include the local banks ceasing lending to overseas borrowers and increased stamp duty for foreign buyers.

If you have purchased a new development, you need to make sure that you are able to arrange finance to avoid losing the deposit that you have put down on your property. Here are a few key points for you to pay attention to if you are thinking about applying for loans in Australia.

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.

What should I look for, besides interest rate?

Most buyers think that the most important thing is the interest rate. However, there are other features of a home loan you need to take into consideration to understand whether this is a loan that suits you.

1. Does it have an offset account?

The ability to offset can save thousands of dollars for you. Your cash account balance is ‘offset’ against your loan balance and you will only be charged interest on the difference, which reduces the amount of interest you need to pay.

For example, say you have a $500,000 home loan on your property, but you also put $60,000 in your offset account. Instead of interest being charged on $500,000, its is ony charged on $470,000 . This difference of $30,000 being 50% of the $60,000 you have in your offset account. This important feature of your loan could save you up to $100,000 over a 25 year loan life.

2. Can I refinance my property?

Refinancing is a very common process of restructuring an existing loan into a new loan. Many borrowers choose to refinance to either move to a loan with a more attractive terms or in fact refinance to access accumulated equity in the property for purposes such as renovations or the purchase additional property. Often referred to in Australia as “refinance & cash out” these funds can be used for many reasons And there are few lenders who will allow you to refinance with certain restrictions. ,So always ask if you can refinance & cash out!

3. Can I pay interest only on my loan?

Interest only loans are very common among Australian property investors to maximise cash flow. Buyers can typically structure a loan with an interest only period of up to 5 years.

For example, a $200,000 loan at 6.5% interest will cost the borrower a monthly payment of $1,254, including principal and interest. However, the payment would decrease to $1,083/month if you choose interest only, saving you $170 a month. This is attractive as it maximises your short-term cash flow.

However, the downside of interest only loans is that your principal does not decrease, which means that you will ultimately end up paying more interest in the long-term. You need to be careful when deciding which one to use.

It isn’t easy choosing a lender as an overseas buyer. The choice of lender is important: their reputation, their customer service, their reliability and processing speed, and hurdle rates. At the same time, interest rates isn’t everything: having the ability to offset, refinance and pay interest only are all key considerations before making a decision.

About Blue Lotus

Blue Lotus Loan platform was established in 2018 specifically to help non-Australian residents to fulfil their goals of purchasing Australian property.

Blue Lotus offers competitive rates, with LVRs available up to 70% LVR. We allow customers to refinance for any reason up to 70% LVR. Access to an offset account and interest only options are also available. We were built to understand the Chinese market, and accept both self-employed and employed borrowers.

Backed by a substantial pool of available capital, large scale loan processing capacity, and Pepper’s reliability and expertise in consumer lending, Blue Lotus is a customer-friendly lender of loan products created specifically for you.

For more information, please call us on +852 3704 3470, or add our WeChat at BlueLotusLoans.

We are here to realise your Australian Dream!                                                                                                                                                     News >