Challenging but rewarding, dealing with overseas clients is becoming increasingly important. MPA’s editor talks to three specialist brokers to find out how it’s done.
In the likely event that you don’t follow international diplomacy, you might have missed the events of 17 June 2015. That was the day the China-Australia Free Trade Agreement was signed, the culmination of 10 years of negotiation between the two governments.
Among a number of important clauses – such as the removal of tariffs for 95% of Australian exports – it’s the 5,000 working visas that will be handed to Chinese workers which has captured public attention. It should capture the attention of brokers too – those are thousands of extra workers who’ll all need a place to live, and finance to afford it.
Overseas clients already play a role in Australia’s property market. Take a walk through the beachside suburbs of Sydney or Perth and you’ll certainly encounter Britis
h and European expatriates (disclosure: this author is one of them). Conversely, many Australians living abroad are determined not to miss out on Australia’s property market, and are buying down under. These two groups need a broker more than most; if the mortgage process wasn’t complicated enough for Australians, the myriad bank and government policies regarding overseas clients make the broker proposition more valuable than ever.
To explain this specialised area of lending, MPA has brought together three leaders in the field, dealing with different types of overseas clients. Addison
Tay, who was 9th on MPA’s Top 100 Brokers list, works for Ausin Group, catering to mainland Chinese looking to buy in Australia, some as overseas investors and some as migrants. Craig Vaughan of MAP Home Loans is an AFG Excellence Awards winner and specialises in migrants from Europe, Asia and the Middle East who need finance in Australia. Finally, Otto Dargan of Home Loan Experts – one of MPA’s Top 10 Independent Brokerages in 2014 – deals with Australians living abroad who need finance to buy down under.
Products for non-residents
In essence, non-residents can buy and get finance in Australia, providing they’re new build properties and get approval from the Foreign Investment Review Board (FIRB). According to the FIRB, temporary residents living in Australia for more than 12 months – such as those on the 457 skilled worker visa – are also able to buy established properties, providing they sell them before leaving the country. And of course Australians living abroad don’t need approval (although who they’re married to matters – see below).
Problems arise in the bank policies that intentionally or unintentionally discriminate against overseas borrowers, and the broker needs to understand this.
For Tay, working in this area means it’s essential “to have the knowledge of which banks are willing to do non-resident loans”. Dargan argues that there are products available: “In most cases they’re able to get the standard home loans and great discounts; the challenge is around potentially reduced LVRs or restrictive policies.”
It’s because of these restrictions, Vaughan explains, that most products aren’t suitable. “We might have 35 banks on the panel, but out of those only four or five are suitable for non-residents, due to their policies.” Furthermore, certain specialised lenders and products, such as those catering to nonconforming and low-doc clients, aren’t on offer to non-residents, which can make it very difficult for the self-employed to get finance.
Most obviously problematic are the reduced LVRs applied to overseas borrowers. As banks follow APRA’s directive to slow investment lending, non-residents are an easy target for policy changes and have been particularly hard hit. While LVRs of up to 95% were until recently on offer, some banks will now only offer up to 70% for nonresidents. This is further complicated in the case of Australians married to non-Australians, Dargan notes. Some banks will limit the LVR to 80% for non-resident Australians with a foreign spouse. There are still good offers out there, he adds. “I wouldn’t say 95% is easy for someone in Sydney these days! It really is a case-by-case; certainly it is available.”
Navigating the paperwork
All three of the brokers we spoke to have horror stories about documentation; indeed this can be a dead end for many lenders, Tay explains. “The assessor will refuse to receive the documents as they can’t read them … we need to know whether they’ll consider it before we submit the deal.” As well as the time spent posting and receiving documents, brokers need to consider whether banks will recognise foreign payslips and tax returns.
Language matters here: if your client’s documents aren’t in English you may have to get them translated by a qualified professional, which can be a major problem for clients, recalls MAP Home Loans’ Vaughan. “I had one quote recently where it’s going to cost the client about $2,000 to get their documents translated. You can’t get an approval – even in principle – without those documents. The bank may pick up on something and they’ve
just wasted $2,000 and not got the loan.”
Identifying clients can also be complicated. Verification of identity rules – which differ by state – require some clients to have documents checked at an Australian consulate. This can cause huge inconvenience to clients that brokers should account for, Vaughan warns. “I have clients having to fly from Scotland to London to be identified, and having to catch a train from Chinese regional cities to Beijing; people in the Middle East, like Oman or Jordan, having to fly to Abu Dhabi, at considerable cost and effort. I think a lot of brokers would get caught up on that, because you wouldn’t know
to think of that.”
Even once you’ve got the proper documentation organised, banks may interpret the information in very different ways, applying Australian standards to non-Australian systems. Take clients with foreign mortgages: “Say someone in the US has a loan of $1m at an interest rate of 2%; the lenders will assess that
at 7%,” notes Home Loan Experts’ Dargan. “It isn’t really fair,” he says. “In the US an owner-occupier home loan is often tax deductible.” Therefore being aware of such differences is vital. “If you don’t understand how that country works it’s very hard to accurately assess those applications and give a good case to a lender.”
To add even more confusion to the mix, lenders simply won’t recognise income in certain currencies, complains Vaughan. “Banks tend to limit who they lend to not by location but by the currency they earn. You could be living in the dodgiest country in the world, but if you’re paid US dollars or pound sterling – prime currencies – the bank will still lend to you.” For example, borrowers in the United Arab Emirates are paid in Emirati dirhams, a currency pegged to the US dollar but nevertheless not recognised by certain lenders.
With so many potential obstacles to getting a deal through, it’s vital that brokers in this area build excellent relationships with banks. As Dargan points out, many banks approach non-resident applications on a case-by-case basis, so it may be possible to get exemptions and explain contentious documentation. For Vaughan, a productive lender relationship has three parts: “You need a bank that, one, has good policies, and two, has staff that know the policies themselves, and finally a BDM that can jump in and sort problems out.”
Managing expectations
As well as managing banks, you’ll need to manage customer expectations, and it’s important to note that these expectations can be surprisingly different. Despite dealing with Australians based abroad, Dargan warns that “what to them is normal is not just normal to us”. For many clients living in the UK, “they’ve been living there for a long time, and they’ve often forgotten that our banks take a lot longer than UK banks”. (In the UK mortgages can be settled in as little as one to two weeks.) Dargan also mentions that his Australian expat clients tend to be looking to refinance loans on properties back in
Australia.
Ausin Group broker Tay also encounters high expectations among clients: as busy high net-worth individuals they expect similar performance from lenders. Time zones can be a particular source of frustration, notes Vaughan, such as “the people at the banks who only work nine to five, who won’t reply via
email; but I haven’t had issues with expectations around turnaround times”. He generally builds in a buffer when predicting turnaround times
so clients are pleasantly surprised when the approvals come back.
In fact it is the broker who may end up being frustrated by the time taken to complete a transaction for an overseas client, Vaughan adds. “The main issue, dealing with expats from a broker’s perspective, is that they’ll get pre-approved and won’t convert that … they’re less motivated. They’re living overseas, they’re not looking for a place to live, they’re not here ... it might take them a year or two to find a property; they can’t just pop out on a weekend and go looking.”
Although much of the process is outside brokers’ control, being able to offer extra services to clients can help speed it up. The Ausin Group encompasses a large number of different divisions, including migration assistance, a real estate arm, and property management – a “full spectrum approach”, as Tay puts it, which helps him stay specialised.
Both Dargan and Vaughan also maintain they lack the time to offer many additional services personally; instead they refer clients to accountants, solicitors, buyers’ agents, money transfer services and migration agents.
Why they’re worth your time
Clearly, dealing with non-residents is not an area for every broker. Given the need for good lender relationships and technical knowledge of other countries’ tax systems, newer brokers in particular may struggle. The brokers featured here have all had extensive experience in broking, often complemented by time spent abroad.
However, just as these brokers were willing to talk about the challenges of non-resident broking, they were also eager to discuss the rewards. “I think the rewards are that the customers are not too price-sensitive, like here; they are more loyal and will stick with you,” explains Tay. “Non-residents only have a few choices when it comes to banks; the price is not all. As long as they can get a good LVR and a good service, that’s more important to the customer.”
Expats – whether they are Australians abroad or foreigners coming here – are often high fliers with considerable resources, Tay notes. “I think the delinquency rates are lower, and certain banks can see this.”
Many of these clients intend to build property portfolios, and their loyalty is part of what makes them good clients, Vaughan says. “They’re top-quality
clients earning good money; they’re professional. They’re good clients and generally good long-term clients.”
Finally, for Dargan the difficulties involved in broking for non-residents are part of the attraction. “They tend to be very loyal; they tend to have referral networks of other expats … and to be honest, for me I just love the challenge!”
Among a number of important clauses – such as the removal of tariffs for 95% of Australian exports – it’s the 5,000 working visas that will be handed to Chinese workers which has captured public attention. It should capture the attention of brokers too – those are thousands of extra workers who’ll all need a place to live, and finance to afford it.
Overseas clients already play a role in Australia’s property market. Take a walk through the beachside suburbs of Sydney or Perth and you’ll certainly encounter Britis
h and European expatriates (disclosure: this author is one of them). Conversely, many Australians living abroad are determined not to miss out on Australia’s property market, and are buying down under. These two groups need a broker more than most; if the mortgage process wasn’t complicated enough for Australians, the myriad bank and government policies regarding overseas clients make the broker proposition more valuable than ever.To explain this specialised area of lending, MPA has brought together three leaders in the field, dealing with different types of overseas clients. Addison
Tay, who was 9th on MPA’s Top 100 Brokers list, works for Ausin Group, catering to mainland Chinese looking to buy in Australia, some as overseas investors and some as migrants. Craig Vaughan of MAP Home Loans is an AFG Excellence Awards winner and specialises in migrants from Europe, Asia and the Middle East who need finance in Australia. Finally, Otto Dargan of Home Loan Experts – one of MPA’s Top 10 Independent Brokerages in 2014 – deals with Australians living abroad who need finance to buy down under.
Products for non-residents
In essence, non-residents can buy and get finance in Australia, providing they’re new build properties and get approval from the Foreign Investment Review Board (FIRB). According to the FIRB, temporary residents living in Australia for more than 12 months – such as those on the 457 skilled worker visa – are also able to buy established properties, providing they sell them before leaving the country. And of course Australians living abroad don’t need approval (although who they’re married to matters – see below).
Problems arise in the bank policies that intentionally or unintentionally discriminate against overseas borrowers, and the broker needs to understand this.
For Tay, working in this area means it’s essential “to have the knowledge of which banks are willing to do non-resident loans”. Dargan argues that there are products available: “In most cases they’re able to get the standard home loans and great discounts; the challenge is around potentially reduced LVRs or restrictive policies.”
It’s because of these restrictions, Vaughan explains, that most products aren’t suitable. “We might have 35 banks on the panel, but out of those only four or five are suitable for non-residents, due to their policies.” Furthermore, certain specialised lenders and products, such as those catering to nonconforming and low-doc clients, aren’t on offer to non-residents, which can make it very difficult for the self-employed to get finance.
Most obviously problematic are the reduced LVRs applied to overseas borrowers. As banks follow APRA’s directive to slow investment lending, non-residents are an easy target for policy changes and have been particularly hard hit. While LVRs of up to 95% were until recently on offer, some banks will now only offer up to 70% for nonresidents. This is further complicated in the case of Australians married to non-Australians, Dargan notes. Some banks will limit the LVR to 80% for non-resident Australians with a foreign spouse. There are still good offers out there, he adds. “I wouldn’t say 95% is easy for someone in Sydney these days! It really is a case-by-case; certainly it is available.”
Navigating the paperwork
All three of the brokers we spoke to have horror stories about documentation; indeed this can be a dead end for many lenders, Tay explains. “The assessor will refuse to receive the documents as they can’t read them … we need to know whether they’ll consider it before we submit the deal.” As well as the time spent posting and receiving documents, brokers need to consider whether banks will recognise foreign payslips and tax returns.
Language matters here: if your client’s documents aren’t in English you may have to get them translated by a qualified professional, which can be a major problem for clients, recalls MAP Home Loans’ Vaughan. “I had one quote recently where it’s going to cost the client about $2,000 to get their documents translated. You can’t get an approval – even in principle – without those documents. The bank may pick up on something and they’ve
just wasted $2,000 and not got the loan.”
Identifying clients can also be complicated. Verification of identity rules – which differ by state – require some clients to have documents checked at an Australian consulate. This can cause huge inconvenience to clients that brokers should account for, Vaughan warns. “I have clients having to fly from Scotland to London to be identified, and having to catch a train from Chinese regional cities to Beijing; people in the Middle East, like Oman or Jordan, having to fly to Abu Dhabi, at considerable cost and effort. I think a lot of brokers would get caught up on that, because you wouldn’t know
to think of that.”
Even once you’ve got the proper documentation organised, banks may interpret the information in very different ways, applying Australian standards to non-Australian systems. Take clients with foreign mortgages: “Say someone in the US has a loan of $1m at an interest rate of 2%; the lenders will assess that
at 7%,” notes Home Loan Experts’ Dargan. “It isn’t really fair,” he says. “In the US an owner-occupier home loan is often tax deductible.” Therefore being aware of such differences is vital. “If you don’t understand how that country works it’s very hard to accurately assess those applications and give a good case to a lender.”
To add even more confusion to the mix, lenders simply won’t recognise income in certain currencies, complains Vaughan. “Banks tend to limit who they lend to not by location but by the currency they earn. You could be living in the dodgiest country in the world, but if you’re paid US dollars or pound sterling – prime currencies – the bank will still lend to you.” For example, borrowers in the United Arab Emirates are paid in Emirati dirhams, a currency pegged to the US dollar but nevertheless not recognised by certain lenders.
With so many potential obstacles to getting a deal through, it’s vital that brokers in this area build excellent relationships with banks. As Dargan points out, many banks approach non-resident applications on a case-by-case basis, so it may be possible to get exemptions and explain contentious documentation. For Vaughan, a productive lender relationship has three parts: “You need a bank that, one, has good policies, and two, has staff that know the policies themselves, and finally a BDM that can jump in and sort problems out.”
Managing expectations
As well as managing banks, you’ll need to manage customer expectations, and it’s important to note that these expectations can be surprisingly different. Despite dealing with Australians based abroad, Dargan warns that “what to them is normal is not just normal to us”. For many clients living in the UK, “they’ve been living there for a long time, and they’ve often forgotten that our banks take a lot longer than UK banks”. (In the UK mortgages can be settled in as little as one to two weeks.) Dargan also mentions that his Australian expat clients tend to be looking to refinance loans on properties back in
Australia.
Ausin Group broker Tay also encounters high expectations among clients: as busy high net-worth individuals they expect similar performance from lenders. Time zones can be a particular source of frustration, notes Vaughan, such as “the people at the banks who only work nine to five, who won’t reply via
email; but I haven’t had issues with expectations around turnaround times”. He generally builds in a buffer when predicting turnaround times
so clients are pleasantly surprised when the approvals come back.
In fact it is the broker who may end up being frustrated by the time taken to complete a transaction for an overseas client, Vaughan adds. “The main issue, dealing with expats from a broker’s perspective, is that they’ll get pre-approved and won’t convert that … they’re less motivated. They’re living overseas, they’re not looking for a place to live, they’re not here ... it might take them a year or two to find a property; they can’t just pop out on a weekend and go looking.”
Although much of the process is outside brokers’ control, being able to offer extra services to clients can help speed it up. The Ausin Group encompasses a large number of different divisions, including migration assistance, a real estate arm, and property management – a “full spectrum approach”, as Tay puts it, which helps him stay specialised.
Both Dargan and Vaughan also maintain they lack the time to offer many additional services personally; instead they refer clients to accountants, solicitors, buyers’ agents, money transfer services and migration agents.
Why they’re worth your time
Clearly, dealing with non-residents is not an area for every broker. Given the need for good lender relationships and technical knowledge of other countries’ tax systems, newer brokers in particular may struggle. The brokers featured here have all had extensive experience in broking, often complemented by time spent abroad.
However, just as these brokers were willing to talk about the challenges of non-resident broking, they were also eager to discuss the rewards. “I think the rewards are that the customers are not too price-sensitive, like here; they are more loyal and will stick with you,” explains Tay. “Non-residents only have a few choices when it comes to banks; the price is not all. As long as they can get a good LVR and a good service, that’s more important to the customer.”
Expats – whether they are Australians abroad or foreigners coming here – are often high fliers with considerable resources, Tay notes. “I think the delinquency rates are lower, and certain banks can see this.”
Many of these clients intend to build property portfolios, and their loyalty is part of what makes them good clients, Vaughan says. “They’re top-quality
clients earning good money; they’re professional. They’re good clients and generally good long-term clients.”
Finally, for Dargan the difficulties involved in broking for non-residents are part of the attraction. “They tend to be very loyal; they tend to have referral networks of other expats … and to be honest, for me I just love the challenge!”
