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

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

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