A common issue for borrowers which have migrated to Australia and retain assets overseas, is that their deposit funds are likely still in non-Australian dollars and held within an international bank. This can become a problem for timing and verification of ownership of funds, which can delay finance. There are ways to mitigate the timing and verification issues associated with using foreign funds for purchasing a property in Australia.
The Verification Issue
When purchasing a property, the lender used must verify the deposit funds being used towards a purchase. This verification generally is made via bank statements from an Australian banking entity – or internally if the same bank used for deposits is used for the purchase finance. As a foreign bank is holding the funds in this case –generally lenders will not be able to accept the statements as evidence of funds available to complete the purchase. The exception for this can be with some of the international lenders operating in Australia – however this is by exception and should be relied upon. To have your loan approved, its essential to have your funds available in Australia at the point of application.
As you’re moving large amounts of funds internationally this can incur significant exchange fees – so it’s worth checking your options with a FX broker. This can potentially see you save thousands in fees, leaving more funds for the purchase deposit. Click for top Forex brokers in Australia.
The Timing Issue
Outside of verifying the existence of funds for the purchase, timing is essential. Dependent on the deposit size, if you have less than a 20% deposit many lenders will require evidence that the funds have been held for a minimum of 90 days in your possession. This is designed to stop borrowers from receiving funds short term from external parties and not showing the ability to save and pay debts – an important requirement when borrowing with minimal cash contributions. Being able to clearly show the ownership of funds across the entire 90 day period is essential – so being able to provide your broker with statements showing transfers from the original international bank account in your name, to an Australian bank account in your name will help show the ongoing ownership of funds. Some lenders will still not accept the ownership statements overseas as proof of ownership during this period, so ensure you let your broker know before any application about the status of the funds and where they’ve been held during this time.
The banks overseas where the funds help can also give timing challenges. Alex from https://www.reversemortgagepros.ca/reverse-mortgage/ notes that’s Canadian banks have daily transfer limits and significant daily overseas transfers can have your account locked for suspicious activity – so it’s important to find out your banking institutions processes for this so you can not be caught into a trap of having your funds locked away when needed in Australia.
If the funds held overseas are held in non-AUD currency, many lenders will discount the estimated value of funds by up to 20% off the exchange rate to factor in currency swings. For the lenders requirements and your peace of mind, ensure you have the funds converted into AUD significantly before settlement or any expiration of cooling-off periods so you do not run the risk of a potential cash shortfall scenario and cannot complete settlement, or have to adjust your finances at significant costs.
Outside of national currencies, cryptocurrencies are still currently not being treated as acceptable evidence of purchase funds. With the expanding fintech regulatory environment, some industry professionals including Bayut believe we will see alternative digital currencies being accepted for purchase contracts, deposit and finance purposes.