Overseas Property Loans 101

International Overseas Home LoanWith the Singapore property prices continuing to stay hot, some property buyers are looking to overseas designations to diversify a part of their property investment portfolio. After all, the experts were always telling us, don’t put all your eggs in one basket.

Some of the common destinations favoured by Singapore property buyers are Malaysia, Australia, New Zealand, London, Japan, Thailand, Vietnam and Indonesia. As these countries have vast area of land, many home buyers are able to buy big landed houses at a fraction of the cost vs buying a property here in Singapore.

But before you dash out to make your purchase, do understand that since your property is hosted in an overseas country with different rules, regulations, culture and government policies, there are different risk to note when investing in overseas properties. Currency exchange risk is one of them, it will play a part in influencing your mortgage, property prices, rental yield and off course your ultimate capital profit gain when you sell off your property.

Ok we've started off with the warnings but as with all investments there are always two sides to a coin - Returns vs Risks. The sweet thing about investing in an overseas property is of course the price, diversification and a wider variety of locations, options and choices.

It’s a whole lot cheaper than Singapore due to scarcity of land in Singapore and a smaller purchase price meant smaller mortgages. Your rental yield also could be potentially higher and more attractive than Singapore properties and may have more room for capital appreciation.

More importantly, banks in Singapore are now offering to finance your overseas property with Singapore dollar funding. With the SIBOR interbank rate at very low attractive rates, property buyers will be able to effectively take advantage of the lower lending cost in Singapore to fund and finance their overseas property as compared to the country's own lending rate.

Let us take a quick look at some of the assessment criteria that banks look at when assessing your mortgage financing application.

 

Income and Debt Ratio Assessment

Banks will assess your total monthly income against your total debt repayment to compute your debt ratio. The debt ratio determines your repayment ability to service the loan.

 

Adverse Credit Report

A credit report search will be run to check for any adverse rating and bad repayment behaviour. If you have not been paying your credit card bills or car loan payment on time, then this might prove to be detrimental to your mortgage loan application. Don’t worry if you have been late in your mobile phone bills as telecom billings are not recorded into the credit bureau records.

 

Capital Assets / Bank Deposits

Some banks may require you to show some bank deposits to buffer for any currency and property price correction.

Maximum tenure eligible is up to 80% of the property valuation price with typical loan tenure of up to 30 years.

 

 

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