With all the cooling measures imposed on Singapore properties, more investors are exploring foreign properties as an option. One major mistake investors make is to assume financing works the same way as Singapore properties. Let’s explore the ways to finance a foreign property.
Foreign properties marketed in Singapore
The evergreen popular overseas properties are in UK (London) and Australia (usually Perth, Sydney or Melbourne). In recent times, Malaysia properties especially in Iskandar Johor have receive much interest, and died down since 2015. Appetite of London properties has waned with the Brexit vote. Australia launches are still pretty strong.
Reasons to buy overseas properties
With much liquidity in the market, savvy investors are finding ways to hedge against inflation and better yields than deposits with banks.
Some folks are buying as a home for their children when they study overseas. This explain why property launches held in Singapore for UK and Australia homes are selling well. Instead of paying for rental and get nothing in return, investors are willing to take risks to protect their money, and hope for capital appreciation.
More are speculating in Iskandar on the back of the many planned initiatives such as the RTS from Johor to Singapore and HSR from KL to Singapore. HSR has gained traction with the signing of MOU and awarding of tenders. As of 2017, there is no concrete news on RTS.
On the flip side, currency movement is a real risk that you have to consider.
Financing a foreign property
There are banks in Singapore that offer mortgage financing for these foreign properties. This is good news for Singaporeans as local lending takes away the headaches of finding a lender in the foreign country.
In addition, foreigners working in Singapore are eligible for some of these loans. For expats who are familiar with their home countries or plan to return after working here, the mortgages often offer lower interest rates than their home countries.
Investors have the option to finance it in Singapore dollars or the foreign currency. These investment loans offered in Singapore are often pegged to SIBOR benchmark rate which has remain low in recent years, in addition to a margin charged by the bank (eg 3M SIBOR + 2.5%). Interest rates in Singapore local currency is often lesser due to its lower cost of funds hence its popularity.
Fluctuations in currency will be a factor to consider, given the historically strong Singapore dollar and quantitative easing policies.
Typically the loan-to-value (LTV) ratio is up to 70% which means 30% downpayment is required. It can be as long as 50%. However, do not assume 70% LTV is a certain even if your income is strong. This is an area where many investors assume wrongly. Buying an apartment in the right suburb does not mean financing is a certainty. For example, there’s almost no mortgage offered for an apartment that is 40sqm in size located in Melbourne CBD, even if your income is strong. Banks might not have the same positive view on the project, apartment and/or location.
Certain cities, suburbs or projects might be outside the lending scope. There is usually quota for each project for each bank so it is always better to obtain financing earlier before the bank reaches its exposure limit.
How we can help you
Mortgage brokers like us who know the financing options well, can help you. Our expert Foreign Property Mortgage Advisors will offer a free consultation to guide you through the options. We will:
- Advise you on the latest mortgage trends and policies
- A logical and methodical approach in assessing and recommending
- A single channel to all banks and parties
Do you know we are the first and only company to offer Australia house and land financing to non-residents since 2016? Check out our Australia Mortgage Portfolio.
Check out the individual home loan sections:
- UK (London)
- Malaysia
- Australia
- Japan
- USA