Mortgage Struggles Continue to Confound

With home loans remaining unattainable to most foreign residents without a local guarantor, Taiwan’s financial authorities suggest dialogue with stakeholders.

Home, as the saying goes, is where the heart is – and for many long-term foreign residents, that place is Taiwan. After legally residing in Taiwan for five years, most white-collar foreign nationals are eligible for permanent residency. Although naturalization typically requires renunciation of one’s original nationality, a select few have achieved dual nationality through making “outstanding contributions” to Taiwanese society.  

Yet in a concrete sense, most foreigners can almost never be at home, as Taiwan’s banks continue to set impossibly high barriers to obtaining a mortgage without a local guarantor. These obstacles were touched on in a TOPICS article on banking last year by a British entrepreneur who was able to secure a guarantor-less home loan only through dogged persistence. After facing outright rejections by 14 banks – domestic and foreign – Derek finally secured his mortgage through a local branch of an international bank, but only by making a 50% cash deposit.  

“That’s not possible for most [people], especially now when prices are approximately double when I bought my place,” Derek says. He does not know of any other foreign national who has managed to get a mortgage without a Taiwanese national vouching for them.  

“I have a friend in his 80s who was forced to buy a place because his wife is sick, so wanted to be here,” Derek says. “He was pretty angry that it cost substantially more than in his home city, the capital of a Western European country.” 

Indeed, examples of foreign residents with mortgages in their own names appear to be rare. The only other person TOPICS could find was Marco, an Italian working for a tech firm. Like Derek and the other foreign resident quoted in this article, Marco prefers not to use his full name, partly because of the immense difficulty he experienced in securing a loan in the first place.  

Having approached dozens of banks between 2020 and 2021 – including different branches of the same institutions – Marco believes a combination of fluent Mandarin and obstinance “helped push things over the edge” in obtaining a 20-year mortgage with a 30% deposit on a 13-ping (43-square-meter) apartment. Calling the system “a black box,” he notes that the decision-making process at individual branches appears to be completely arbitrary. 

“The boss in each place makes up their own rules and then changes them,” he says. “If you give me a list of rules – this, this, and this – I’ll do it! I went to Union Bank once to try to get a loan for a business. They sent me on a wild goose chase for months before saying I didn’t have a house for collateral. Why didn’t they just say that in the first place?” 

Marco notes that, as foreigners of non-Asian descent are easily identifiable, immediate rejection has become the default response from most banks. “Because of the citizenship laws, they will already assume you’re not Taiwanese if you’re white or black,” he says. “If more foreigners became Taiwanese, banks wouldn’t do this because they could easily be sued for discrimination.” 

The delicate issue of “not looking the part” has been raised by some foreign nationals when discussing basic rights and access to services. Several respondents have mentioned cases of “nationals without household registration in the Taiwan Area” (NWOHR) who hold a Taiwan Area Residence Certificate (TARC). These individuals, it is claimed, experienced few problems applying for credit cards and other services, even when their Mandarin was patchy.    

“It’s basically ethnonationalism,” says Marco.  

An example of Taiwan’s apparently institutionalized discrimination along ethnic lines can be found in provisions regarding refugees. These measures handle cases from stateless Tibetans (historically considered Republic of China citizens) and “overseas Chinese” from Thailand and Burma (two groups comprising descendants of Chinese Nationalist soldiers) differently from other asylum claims. Applications by victims of political persecution from China, Hong Kong, and Macau are also theoretically treated more favorably. 

In some cases, individuals of Taiwanese descent with foreign nationality have reportedly received a warmer reception than other, more creditworthy foreigners. But elsewhere, individuals with Taiwanese heritage have fared badly, if not worse. Chris, a restaurateur with American nationality and an Alien Residence Certificate (ARC), was initially snubbed by around 40 bank branches despite offering 50% upfront. Like Marco, he approached many different branches of the same bank. 

“It seems to be up to the individual branch manager,” he says. “So, I tried maybe 8 Fubons, 12 First Banks, 10 Cathays and they all told me ‘yes’ in the beginning because I was paying half off in cash.”  

What followed was a reiterated pattern: Chris would be asked for a set of documents and, upon returning with them, be told that management had declined his request. “I would try to explain to them that it was a win-win –  I’m not taking a mortgage on the whole house, and they have it [as security],” he says.  

He is unsure whether he would have ever been able to proceed without a guarantor as “it didn’t usually get that far.” When a branch of Taiwanese First Bank finally accepted his application, it was contingent on providing a local guarantor – in this case a relative.   

“Many Taiwanese Americans get household residency because it’s easier to get loans for businesses and other things,” he says. “Otherwise, dealing with the banks is a hassle.”  

While principles of creditworthiness and reciprocity with other countries theoretically govern the norms concerning mortgage applications in Taiwan, there are in practice “no particular statutory regulations,” says Jun Chen, a partner at the Taipei office of international law firm Baker McKenzie. Supporting the view of the interviewees for this article that policies and practices vary from bank to bank and branch to branch, Chen says the situation remains “very ambiguous.”  

Notably, guidelines laid out by the Bankers’ Association of the Republic China governing credit-granting don’t distinguish between local and foreign applicants. “Banks usually adopt their own internal procedures for assessment,” says Chen, who provides legal advice on real estate-related contracts. Criteria include evidence of stable employment, good credit, and pay slips “to indicate repayment ability.” 

In response to inquiries by TOPICS, the Banking Bureau of Taiwan’s Financial Supervisory Commission (FSC) echoed Chen’s remarks. The bureau referred to “the 5P principles,” explaining that these included “an applicant’s financial status, ability to repay, and quality of collateral.” As there are easily verifiable cases of successful entrepreneurs who have offered hefty cash deposits only to be flatly rejected, this clearly begs the question.  

However, there are signs that the FSC and other authorities are waking up to the problem. Following its emailed response, a spokesperson from the Banking Bureau called the author to propose a face-to-face meeting at which case studies could be shared.  

“We may have people from the Bankers Association join the meeting to see what can be done to build a more friendly environment for foreigners,” says the spokesperson, who also indicated that other foreign nationals might participate. “Your suggestions would be greatly appreciated.”  

For Marco, the foremost stumbling block to progress is the lack of an enforcement mechanism. He cites independent regulators and human rights commissions in other countries that “would easily enforce fines or other punitive measures” for discriminatory practices.  

A further systemic flaw, he believes, is the use of “dual agents” in Taiwan. He points out that real estate markets in Western countries will usually have separate buying agents for the purchaser and selling agents for the homeowner. “Here the agents do both, negotiating between you and the seller, which I think is a conflict of interest.”  

Perhaps the biggest headache for Marco was the peculiar vicious circle he found himself in. On the one hand, his real estate agent required a NT$20,000 deposit and a signed contract to bid on a property, refundable only if the bid failed but not if the bank rejected his mortgage application. On the other hand, he says the banks wouldn’t discuss terms with him until he had signed the bid agreement. 

“It’s a loop and you can’t escape,” he says. “I kept telling them it was a risk for me, because if I couldn’t find a bank to mortgage it, I’d lose NT$20,000.” 

And this was in fact precisely what happened on one occasion. As a result, Marco tried to engage agents to approach the banks on his behalf, though it required persistent badgering. “You ask them to do things and they’ll say, ‘You need to do it yourself, it’s not our job,’” he says. “‘Then what am I paying you for?!’ It was a year before I found someone who was asking more than one bank and trying to really fight for me.” 

Elsewhere, some foreigners emphasize the advantages of using a local guarantor where possible. “As foreign nationals, we are locked away from many of the benefits that Taiwanese are able to enjoy when buying property,” says Eddie, a British resident of New Taipei City. Exorbitant down payments and unreasonable, unattractive interest rates are motivations for using a local guarantor, he says. 

“Those who have Taiwanese spouses should let them purchase the property and apply for the mortgage in order to get reasonable terms,” Eddie says. He refers to the preferential mortgage program for young buyers passed by the Executive Yuan in 2023, which became effective in March this year. “Under this scheme, a Taiwanese national can quite easily get a 1.775% interest rate with a roughly 20% down payment,” he says. “Whereas, if a foreigner were to try to put everything in their own name, they might only be able to get a 2.5% interest rate with a 30% or more down payment.”  

The lower rate could result in huge savings over the course of the loan and bring forward the purchase date by many years, Eddie notes. Addressing arguments about potentially disastrous settlements in the case of divorce, he says Taiwan’s divorce courts are generally fair, and property should be split equally. “There is little difference whose name the property is actually in. So why pay more in interest and a higher down payment just to see your name on a piece of paper instead of your spouse’s?” 

Baker McKenzie’s Chen also emphasizes such preferential conditions as a reason foreign nationals might consider going with a local guarantor. “Interest rates are low and often subsidized,” says Chen. “And foreigners might not normally enjoy these benefits.” 

For Marco, this argument misses the point. “I’m a very independent person, and I shouldn’t have to rely on,” he says. “I don’t want special treatment – I just want what any normal person can get.” 

As for the reasons for outright rejections of eminently qualified candidates, views are mixed. While some cite institutionalized discrimination, others believe it’s just the desire for a quiet life for banking employees, free from the recriminations of their superiors. “I think it’s just they don’t want to deal with the paperwork,” says Chris. “The banks are a bit old-fashioned in Taiwan.” 

While Marco says he does believe that discrimination is sometimes involved, he adds that it’s often just “a cold calculation.” In Western countries, he says, “there are rules to prevent these calculations going into the equation.”  

In Europe and North America, companies routinely fight for a customer’s business, whereas in Taiwan, it often feels like one is fighting to be a customer, Marco says. “Banks and telecommunications companies here will deny thousands of dollars of perfectly good revenue because someone once defaulted on some insignificant amount.” 

Regarding the question of why the property itself is not considered sufficient security, Chen points to conservative mindsets among Taiwanese banks. “Taiwanese banks don’t always see collateral as a benefit,” she says. “Instead, they think it’s a liability, because if there’s any default, they’ll need a public auction or enforcement proceedings. That’s something they’re not willing to do, so they often see [the property] as a burden.”