Hmmm… banks

Interest rates for home loans are low in Malta/Europe, at around 3%. In Australia I can invest and earn at around 6%. Given the 3% interest differential, I was considering borrowing to purchase a property in Valletta, rather than sell assets in Australia and buy  the property in cash. If I borrow at 3% and my assets are earning 6%, I’m in front by 3% pa. So, for example, if borrowing 200,000 euro, that differential would earn the equivalent of 6,000 euros pa. In 10 years that would save a lot; effectively, taking about 35,000 euros off the cost of the property (60,000 E earnings in Australia minus about 25,000 E interest paid in Malta = 35,000 E). So, I talked to my bank today.
We are very fortunate in Australia.
Here are the requirements of a potential loan (after showing all my earnings over the last few years, my total assets, my superannuation which becomes available next year etc. etc.)
# loan of potentially up to 70% of the purchase price (depending on income)
# term of the loan only up to age 65 years
# security to be both the property being purchased AND my apartment in Marsaxlokk
# I must take out an expensive life insurance policy made out with the bank as beneficiary for 110% of the value of the loan amount
# bank fees: processing fee 450 E; legal fee 350 E; third party costs 60 E; buildings insurance premium of 1 euro for every 1000 E of sum insured, 23.20 E for updating each land registration for property used as security and 13.90 E search fee every 8 years
# I would be charged the non-resident interest rate (about 1% higher) even though I am a resident and have an ID card (because my income comes from abroad)
# I must pay for an architect’s valuation of both properties used as security
# early termination fee, if applicable
And, if I want to change any conditions of the loan, later, I think I have to give them my first born.
It was a good idea that would have been of substantial financial advantage to me, and I can prove that my chance of defaulting on the loan is zero, but there is no guarantee the loan will be approved. The loans officer was very nice, very affable and wanted to help, but she has rules and conditions to follow. I think my bank in Malta just lost some good business.
PS I think the loans officer is going to buy a copy of my book.



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