Meet Nadia Diehl. An Aussie Expat in Dubai. Learn about how a sudden change by Australian banks in lending rules to non-residents of Australia caught Nadia by surprise when financing her house and land package in Australia.
Tell Us About How You Ended Up In Dubai?
During the Global Financial Crisis, I was working in Sydney as a finance broker and suddenly found my business shrinking and struggled to make a decent income. As a result, I decided to buy a round the world ticket to go travelling with the intention of possibly trying to end up in New York. After spending a bit of time in India, I stopped in Dubai. While in Dubai I met my future husband (Robert), got a job, and started a family. I have now been living in Dubai for the past 9 years.
What Do You Like Most About Being An Aussie Expat in Dubai?
The two biggest benefits and what I like the most about living as an Aussie Expat in Dubai is
(1) it is a very luxurious lifestyle, and
(2) is that I do not pay any tax in Dubai.
The biggest downside about living here is the hot summer weather.
When and Why did you first start investing in property?
One of the downsides of working in Dubai is there is no long term safety net, ie. I am not contributing to superannuation. So, I wanted to make an attempt to start building my financial safety net, but previously we felt the Australian dollar was too high to justify investing our savings in Australian property.
As a result, we initially bought two investment properties in Dubai. One property was for my husband and I to live in, and the other one we rent out. The properties have performed well, and the property which we rent out has a high return on investment (over 6%pa), is cashflow positive, and we pay no tax on the income.
Tell Us About Your Property Purchase in Australia?
We were back in Australia on holiday and went to visit friends living on the Sunshine Coast. We really liked the area and after doing some research we identified an area called Peregian Springs. Peregian Springs is one of the fastest growing regional areas in Australia, is located close to the Sunshine Coast airport (which will soon start taking international flights), and the local university campus.
We wanted to save a bit of money and thought we could best do that through a house and land package. In the end we signed a contract for $550k (made up of $290k for the land and $260k for the house).
How did you go about financing the purchase?
The finance for our house and land package was in two parts. Firstly we needed to finance the land purchase, and secondly we needed to finance the house construction.
We were referred to a mortgage broker by a friend. He then arranged a loan with ANZ for the land purchase at an 80% loan to value ratio (meaning we needed to come up with a 20% deposit). The land was worth $290k and so we obtained a loan of $232k and paid the balance in cash.
After all development approvals were in place, and when construction was due to start on the land purchase we went back to our mortgage broker to arrange the loan for the second phase of the contract.
This is when things got difficult. We were originally expecting to pay a further $52k deposit and take out a $208k loan, based on a $260k house construction with 80% loan to value ratio. We were then told by ANZ that loans to non-resident investors now required a 30% deposit (not 20%), and that the 30% deposit would be required across both the house and land portions of the loan. As a result, we found ourselves having to find an additional $55k in cash in less than a week (that wasn’t budgeted for) in order to finance our house construction.
Fortunately, I was able to access the bank of Mum & Dad (ie. Borrow the additional deposit from my parents), otherwise we would have gone into default on our house and land package.
What were the lessons from this experience?
There were two main lessons for us in purchasing this property in Australia.
Firstly, I would not do a house and land package again from overseas. Having to project manage the entire process from overseas (particular all the paperwork involved) was very time consuming.
Secondly, I would recommend using a mortgage broker that is specifically experienced in arranging loans for expats. The experience with our mortgage broker was that often he was not aware of the bank’s specific requirements for expats. At times he would not send through all the correct forms or would give the wrong instructions, and as a result the whole process took much longer. In fact, if we had a broker that was experienced in arranging expat loans, we may never have had to find the additional $55k deposit. This is because if we finalised all our loan documentation five days earlier, the new non-resident loan changes would not have impacted us.
What have your experiences been in financing your property purchase in Australia recently?
Share your experiences in the comments section below.
Need Help With Financing Your Property Purchase in Australia?
If you are an Australian citizen wanting to refinance your existing loans in Australia or wanting to purchase a property in Australia, then I highly recommend talking to a mortgage broker that specialises in obtaining loans for Australian expats. As you have read in this article, the lending criteria of the banks is tightening. Every bank has different lending criteria that applies for expats, and that lending criteria could vary again depending on how and where you earn your income.
I recommend my personal mortgage broker, Craig Vaughan from MAP Home Loans. Craig specialises in obtaining finance for Australian Expats and is familiar with the lending criteria of each of the banks, and so will quickly be able to advise you on the best course of action. Craig doesn’t usually work with new clients, however has agreed to offer a free 30 minute discussion with readers of The Australian Expat Investor. Complete the inquiry form below, and Craig will contact you to arrange a time for a discussion.
Here are some related articles to this story that might be of interest to you :
- 6 Steps to Buying Property in Australia From Abroad
- Benefits of Using a Buyers Agent
- Why Australian Expats Should Use a Mortgage Broker
- How Australian Expats Can Finance a Property Investment in Australia
- Australian Banks Restrict Loans For Non Residents
- What is the Best Way to Convert Dirhams to Australian Dollars?
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Disclaimer : This information is for educational purposes only and does not constitute financial or taxation advice. As this information is not advice and has been prepared without taking into account your objectives, financial situation or needs you should, before acting on this information, consider its appropriateness for your circumstances. Independent advice should be obtained from an Australian financial services licensee before making investment decisions, and a registered (tax) financial advisor/accountant in relation to taxation decisions. To the extent permitted by law, we exclude all liability for any loss or damage arising in any way.