APIA Blog

RSS Feed

Ryan Smuts: Do banks care about overseas income and debts?

Monday, June 22, 2020

IMAGE CREDIT: UNSPLASH

Hell yeah! 

Banks always want to know your full financial position when assessing lending. They want to understand what your commitments are before they proceed in deciding on whether to lend you further funds.

Just because you have liabilities overseas for example, this shouldn’t be treated any differently. It is no different to approaching ANZ for a loan, and not telling them about a loan from ASB that you have. Non-disclosure doesn’t sit well with lenders.

So how will your overseas incomes and debts change the way you are assessed by NZ lenders?

For the income side, the two main forms of overseas income we see are as follows:

  • Personal Earned Income
    • If you are employed overseas and buying property in NZ (because you are a permanent resident or citizen) OR are living in NZ and employed and earning foreign currency then what most banks will do is convert the foreign income to NZD equivalent, and then scale it back or reduce it (depending on the lender, and the currency) by between 10% and 40%, to allow for exchange rate risk.
    • If you are self-employed overseas (as per above) OR self-employed here and earning foreign currency, then it gets even more difficult – most lenders will not accept self-employed overseas income. This may change in the future, but at the time of writing is very difficult.
  • Rental Income:
    • This will be treated much like employed income above. The foreign currency will be converted to NZD, then scaled accordingly – however there is one major difference – they will also scale back a further 20-25% off that figure due to it being rental income (to allow for operating expenses of a rental – rates, insurance, vacancy, maintenance, etc.).

For the debt side of things, the key debts would be:

  • Mortgages
    • Lenders would likely look at your total mortgage limits and apply a test rate as they do here. If your repayments are higher than what our test rated version would be – they would then use the higher of the two.
  • Other debts:
    • Credit cards would be treated much like ours here in NZ – 3% of the limit of the card loaded as a monthly expense (even if you’re not using the card and even if nothing is owing) so sometimes having high credit card limits can hurt your servicing capacity – overseas or locally.
    • Personal loans – this would be taken for the actual payment made (in its NZD equivalent of course).

Ideally what you want is to ensure that your full position is disclosed to a lender up-front the first time and they can then make a fair assessment on this to determine if you’ll be eligible for further lending with them. As mentioned above, non-disclosure is never a good look – especially in this tight lending environment.

We are helping more and more repatriated Kiwis with existing financial commitments offshore to secure property lending in New Zealand. Feel free to reach out at any time to discuss your requirements. We would love to help. 


ABOUT THE AUTHOR

Ryan Smuts 

Ryan is a Key Accounts Manager at Kris Pedersen Mortgages and Insurance as well as a property investor. 

 

 

 

 

Recent Posts


Tags

ring-fencing Kris Pedersen Mortgages and Insurance Jeff Bezos trademe trespass rent increase ventilation letting HSWA barfoot and thompson rtaa2020 relationship property cycle house prices termination Market report debt enforcement winz finance tenancy tribunal subdivision yield buying sale and purchas election2020 investor property value twg report investment strategy anti-social behaviour principal and interest worksafe heating letting fee income auckland council airbnb asbestos boarding house bond minor dwelling smoke alarm bond form will capital gain damage property management housing affordability government Gluckman first home buying mindset bad tenant How to skill shortage maintenance fixed-term tenancy Tribunal case study rental wof rta Investor story khh Holler LIM Question and answer recycling equity short-term rental shower dome partners market cat rental market gluckman report privacy renovation robert kiyosaki Editor's Choice interest only inspection mortgage management banking positive cash flow ird wealth creation re agent warren buffett HHGA lvr holiday house trust clnz Case study television landlord watercare reserve bank CoreLogic auckland HHS opes partners development sale and purchase covid-19 tax business meth ask an expert education p lab cgt initio unitary plan equity return meth contamination buyer's agent CCC structure election 2017 market rent personal growth off the plan Landlording scotney williams building tenancy issues anz productivity commerce commission parry v inglis interest rates Must knows TCIT Standards New Zealand water bill legal insurance tenant rent Level 4 cash-flow RTAA 2019 advice Must know property apprentice property maintenance wins data security warm up new zealand buying rules RBNZ Property (Relationships) Act negotiation tenancy services rta reform Guest blog kiwibuild rent arrears beginner investor financial advisers act extractor fan housing bubble heater Q&A nzpif early termination Sponsored post insulation Investment tip DTI property speculator sublease ocr

Archive

Introducing Our Partners
Principal Sponsor - Kris Pedersen Mortgages & Insurance logo Gold Sponsor - Barfoot & Thompson logo Gold Sponsor - CoreLogic logo Property Apprentice logo The Insulation Warehouse logo The Renovation Team logo The New Zealand Property Investors' Federation logo
09 360 2376
info@apia.org.nz

The Tenancy Practice Service and TPS Credit Control work closely with the Auckland Property Investors' Association. Our vision of bringing helpful resources, documents and high quality services to Auckland Property Investors and Property Managers is shared by APIA, so its a partnership that works well. 

The Auckland Property Investors' Association is a great organisation for those who want access to advice and information from a range of industry experts and partners. 



Mathieu Holt- Managing Director, The Tenancy Practice Service & TPS Credit Control
Through the Association I found the channels and methods to fund the purchase of property I never dreamed about. Grant Brown

All round it has been one of those things Neil and I felt was really worthwhile belonging to. We have learned so much it has just built our confidence in what we are doing.

Janice Bieleski
I read two articles in the monthly magazine that saved me over $5,000. That is my membership fee for the next 26 years and I am sure I will learn a whole lot more! John Duncan
Fantastic organisation. The networking opportunities are brilliant and provide us with information and opportunities that cannot be obtained anywhere else. We learn something new at every meeting and we've been in this game for nearly 20 years. Pauline and Gyanen Kumar

I find the information obtained from various APIA meetings very useful in guiding my own property investment and rental management.  I also enjoy the networking opportunities with like-minded investors.  I am inspired by other investors’ success and find the more experiences and knowledge that I share with others, the more confident I become.  

Thanks to all APIA event organizers and administrators for your brilliant work. 

Stella Shao

I like talking to people and learning from their experience because it gives me the confidence to invest well. I think it is a knowledge thing. I now know I am doing things the right way.

Stephen Weatherall

My APIA membership has become a total success.

Every time I attend a monthly or regional meeting I come away with so many useful and positive tips that have added value to my property investments and management.

Not only that, the website is a great place for practical advice and useful information. It has now evolved into an important resource for my business.

Talk about value for money! The discounts I have been getting at Bunnings when I present my APIA membership card have more than paid for my annual subscription!

Tim Duffett, Plan A Investments Limited