Nathaniel Nhan Truong, director of The Lounge Lounge, recalls how he helped make the Australian dream come true for two non-resident business owners who wanted to buy their Sydney premises
Many of Australia’s foreign residents want to take advantage of the booming economy and property markets, but it isn’t always easy. Not only is it more expensive, these buyers require approval from the Foreign Investment Review Board, depending on their circumstances. Often the loans require bespoke terms and conditions, and some major banks have stopped accepting residential mortgage applications from non-residents altogether.
Despite the challenges, it’s far from impossible, so when a solicitor referred a self-employed couple to Loan Lounge we were hopeful a workable solution could be found. The couple were in their early 30s and had already placed a 10% deposit for a commercial property in Chatswood, Sydney valued at $555,000 with settlement due in a year’s time. They both had visas with three and a half years remaining, and while the income wasn’t strong on face value, the business had gained significant traction and was already operating from the premises they wanted to buy.
They had tried to secure finance with multiple providers receiving the approval each time only to discover on settlement the lender would not be able to deliver. The client had faced this blow time and time again, and the stress levels had increased considerably; already limited by their visa and employment status, their narrow choice of products was decreasing further.
As all this was against the would-be borrowers, the vendor was pressuring them to pull out so they could get a better deal as the markets swayed upwards, potentially threatening the future of the business.
To overcome the limitations in the criteria, we had to think outside of the box and draw on our commercial experience. We started by understanding the client’s position and the applications she had placed with various lenders before this point. At this time, it emerged they had become so exhausted by the lack of options, they were about to pay a private lender $20,000 upfront to get a deal approved and over the line, with ongoing costs of 2.5% interest per month. I still remember being on the phone with the client when she was at the branch and about to make the transfer. It was at this point to really gain her trust and give her confidence that we could get the deal done.
“To overcome the limitations in the criteria, we had to think outside of the box and draw on our commercial experience.”
We found out that the deal had been submitted to ANZ Business Banking using payslips instead of the company financials. We were able to make the deal work under the full document policy using the rental addbacks. Because the couple were purchasing an owner-occupied property for their business premises, they were no longer paying rent. Therefore, that money could be taken out of their ongoing expenses and considered as income, further boosting their serviceability.
We also structured the loan over three years to give the bank comfort around the visa situation and ensure the loan would be paid off regardless of the visa's renewal.
The first step to understanding and knowing the client is the most crucial in the loan process. We took time to understand the client’s position and understand if previous applications were made and how they were made. The details – and near deals – that emerged during this process gave us greater insight in preparing the right proposal.
The clients had faced a series of setbacks, despite their growing business and were about to agree to a deal with terms that would not have been in their best interest. Throughout the negotiation of the loan, we had to be mindful of their visa situation and how the loan had to be renegotiated over the next three years to take into account their permanent residency or risk a sale down the track.
Fortunately, we were able to provide the clients an approval in a timely manner and not only reduce their upfront costs but provide an affordable loan over the next three years.
Today, the clients own their own business premises and have permanent residency. They were very happy with the outcome and they have become clients for life. We are currently looking after their first land and house package and renegotiating the commercial loan over a 15-year term. We are very pleased with the outcome as there was a clear benefit for all parties.
Nathaniel Nhan Truong
The Loan Loungegive