One On Title, Two On Loan

Why opt for “One on Title, Two on Loan”?

Non-residents living in Australia will find that getting a mortgage in Australia is more costly for them than for their Australian counterparts because they have to pay foreign stamp duty surcharge.

To avoid the foreign stamp duty surcharge and to get competitive interest rates, an expat or a non-resident can jointly get a loan with an Australian citizen.

The biggest advantage of adding your partner to your mortgage would be both of your incomes will be assessed during a home loan application which should enable you to borrow a higher amount.

Additionally, having a spouse who is an Australian citizen or a permanent resident, means you are eligible for the First Home Owners Grant (FHOG) if you purchase the property together provided you meet all the other requirements.

What are the lending criteria?

Lenders apply very stringent credit guidelines when assessing expat and non-resident loans.

• LVR ratio: Lenders will only be willing to lend you at 80% Loan to Value Ratio (LVR).
• Employment type: Lenders accept pay as you go (PAYG) and self-employed borrowers. (companies, business borrowers and trusts are excluded)
• Full documentation: Lenders don’t prefer to do low doc loans in this structure.
• Acceptable income: You need to have your foreign income evidence translated and the amount converted to Australian dollars via an authorized translator. The foreign income is assessed at 70% only.
• Visa requirement: For an Australian permanent resident, he/she must have a minimum of 2 years of validity.
• Credit report: Lenders will look at your credit report from the country you reside as well as your Australian credit report history.

What are the pros and cons?

Pros:

• Borrowing capacity is typically increased as the home loan is based on two incomes
• Avoid paying foreign citizen stamp duty
• Get discounted Interest rates
• Borrow up to 80% LVR
• This structure may bypass the requirement to get a Foreign Investment Review Board (FIRB) approval.

Cons:

• The person not included on the title but on the loan is at high risk because he/she will not own the property but will have to make monthly repayments on the mortgage.
• If the non-owner client wants to get another loan down the track then they will have reduced borrowing capacity.
• Creditors of the non-owner could come after the property if she/he went bankrupt.
• Risk of being rejected if your spouse is not eligible for the loan
• All borrowers must have a benefit (otherwise they are a guarantor).
• The interest rates are generally higher.
• Only a very limited number of lenders to choose from.
• For investment properties, it is harder to prove there is a benefit for the borrower not on title unless they are using the funds e.g. cash out to invest in shares together.
• There are multiple fees attached to this loan structure including lender fees, application fees, establishment fees, risk fees, valuation fees and legal fees.

Approximate fees:

How can a mortgage broker help?

A mortgage broker can help to ensure that the application will be lodged once the criteria has been met. They will do their part in ensuring that the loan goes through as they know the best lenders for the specific situation and the competitive rates that they offer. 

When applying for an Australian mortgage, you will need to provide documentation and evidence. The broker will make sure that you have:

• Copies of personal identification documents (for example: your passport)
• Proof that you qualify under FIRB rules to buy a property
• Proof of legal residence in Australia (if you have it)
• Documents that prove you’re creditworthy (things like a credit check, proof of your wages, bank statements, tax returns for the last three years or an employer’s letter)
• Documents that prove your ability to service the mortgage

Is a permanent resident eligible for this product?

Australian permanent resident visa holders are limited to the following “Acceptable Countries” list. 

• Australia
• Brunei
• Canada
• China
• France
• Germany
• Hong Kong
• India
• Indonesia
• Japan
• Macau
• Malaysia
• New Zealand
• Philippines
• Saudi Arabia
• Singapore
• South Africa
• Switzerland
• United Kingdom
• United Arab Emirates
• United States of America

Will my currency be accepted?

There is a good chance that we will be able to get you approved for a loan if your income is mentioned in the following list of currencies.

• Australian dollar: AUD
• Brunei dollar: BND
• Canadian dollar: CAD
• Chinese Yuan Renminbi: CNY
• European euro: EUR
• Hong Kong dollar: HKD
• Indian rupee: INR
• Indonesian rupiah: IDR
• Japanese yen: JPY
• Macanese pataca: MOP
• Malaysian ringgit: MYR
• New Zealand dollar: NZD
• Philippine peso: PHP
• Saudi Arabian riyal: SAR
• Swiss franc: CHF
• Pound sterling: GBP
• UAE dirham: AED
• United States dollar: USD

Important to note: 

• 100% of your income will not be considered as there will be a certain percentage crunched down due to foreign currency rates
• Acceptable income evidence must be translated into English by an accredited translator and converted into Australian dollars using the current exchange rate

What about the non-owner spouse’s right to the property?

Your spouse will not have the rights or ownership of the property even though he/she is on the mortgage. 

Legal advice should be sought before proceeding with the “one on title, two on loan” structure to be clear about the scenarios where the relationship between borrowers may go sour and lead to a divorce in future.

Is low doc available?

No, it’s not available.

Low doc loans have a criterion where both of the borrowers will also need to be on the title of the property. 

The reason is that the income is difficult to prove traditionally as the banks want to make sure all people take an equal amount of risks.

“One on title, two on loan” structure adds layers of complexity and risks which banks are not willing to do in a low doc format. 

Get approved for a home loan!

Our mortgage brokers are experts in handling this loan structure. Reach out to them so they can assess your situation and work out the best strategy for you and your partner.

Please enquire online or call 1300 889 743 to discuss your situation with one of our mortgage brokers.