Australian Expat Home Loans and Mortgages - Most frequently asked questions, answered!
Prior to 2016, for Australians living and working overseas (whether they are citizens or permanent residents), it was relatively easy to apply and be approved for a home loan. However since 2016, many banks have toughened their stances and made it harder for Australians who have foreign incomes to be able to get a mortgage. Whilst lender policies have stabilised in late 2020, it is possible for an expat to get a home loan at a good rate, but it requires skillful navigation and understanding of lender policies.
How much can I borrow?
For PAYG employees (employed with a base salary), we have seen lenders willing to lend up to 90% of the property’s value (90% LVR) to an expat.
For self-employed business owners, there are very few lenders who have an appetite to lend to these types of customers. Those that do, are willing to lend up to 80% of the property’s value (80% LVR) and also assess each application on a case by case basis.
Are interest rates higher for an expat home loan?
Not necessarily. While some banks limit the rate discount for people having overseas income, others do not discriminate between income sources. As a result, the interest rates may be at the same level of Australian local borrowers.
What are the factors affecting my borrowing capacity as an Australian expat?
Major factors here include the country you are living, the currency of income you are earning, the type and the size of the company you are working with, and your current financial situation including your income, liability and expenses.
Generally speaking, lenders will generally discount employment income, and most likely will not consider any other type of foreign incomes (such as dividends). They will also focus (more so than a local borrower) on the stability of your income and the consistency of your living expenses.
What are the factors of getting an expat loan approved?
In general, the common lending rules apply but more strictly for expats. Apart from meeting regular requirements regarding income, liability and expense levels, the most important part of getting an expat loan approved is the verification of foreign incomes. Due to the barriers of culture, language, time zone, taxation, banking, and payroll system, it may be very hard for lenders to confidently verify the authenticity of your income. Therefore, proper readable and understandable income documentation and easy accessibility of your employer contacts will be crucial to the results.
In saying that, not all lenders perform extensive employment checks or call your employer. This means with these particular lenders, the process for getting a loan is actually easier. We at Reservoir Finance work with many Australian expats and know who these lenders are. Contact us today if you wish to find our more and work with us! We offer a free financial strategy session to ensure we are putting your interest first! On top of that, we do not charge any fees. 99% of our clients did not pay fees to us when applying for a loan.
How can I prove my overseas income?
Standard required income documents include 2 recent payslips, an employment letter, and three months bank statements being translated (if not in English) by a NAATI translator. Extra documents including local tax return or income tax statements may be needed.
For a PR living overseas, a local credit report may also be needed by some lenders.
For Australian citizens, a local valid working visa is needed, but this is waived if you have dual citizenship.
Will my income be discounted?
The quick answer is yes. But it’s more complicated. In general, your income may be discounted by 20% but the maximum discount by one particular lender for certain countries and currencies is 50%.
Will my overseas rental income, dividend income or other investment income be considered?
As a rule of thumb, the answer is no. But some lenders will consider it on a case by case basis.
What if my overseas income has lower or zero tax rates?
As we all know, Australia has one of the highest tax rates among developed countries. If you are working in Singapore or Hong Kong with paying significantly lower income taxes, or in Qatar or UAE with paying zero income taxes, will the lenders acknowledge the fact that your net income is much higher compared to the same level Australian gross income?
Fortunately, the answer is yes, some lenders do allow us to apply your local tax rates, which will allow you to borrow more. But some other lenders including very big ones will apply Australian tax rates on your foreign gross income, which will significantly lower your borrowing capacity.
Mortgage brokers who work with Reservoir Finance are specialists in this field, we can save your time and minimise hassle for an overseas income loan application. Contact us today and we will be happy to offer you a free strategy session to help get the home loan best for your personal circumstances!
What currencies are accepted for an expat home loan?
While each bank has their own list of currencies, the following currencies are the most favourable amongst lenders:
- New Zealand Dollar (NZD)
- United States Dollar (USD)
- Great Britain Pounds (GBP)
- Euro (EUR)
- Canadian Dollar (CAD)
- Japanese Yen (JPY)
- Singapore Dollar (SGD)
- Hong Kong Dollar (HKD)
- Swiss Franc (CHF)
For the above currencies, you will have the best chance to get the lowest discounts on your income, and to get your loan approved. For other currencies, including popular Chinese Yuan or Renminbi (CNY), restrictions may apply depending on different lenders.
Check with us as it depends on the lender you are looking to get a loan from.
What exchange rate do lenders apply for expat borrowing?
In most cases, lenders either use their own exchange rate or rely on recent XE Live Exchange Rates to convert the foreign currency into Australia dollars. Depending on the currency and timing of the application, exchange rate may play a crucial role in passing a particular submission. Talk with us and find the best way if your situation is one of those who really need to rely on exchange rates to pass the line.
What are the loan products available for an Australian expat?
For the lenders who accept your overseas income, all their loan products will be available to you as an Australian expat. Therefore, nearly all popular loan products will be available for Australian expats, including loans for new purchases (investment or owner occupation for family or for your own holiday living), refinances, or buy a house and land package which involves construction loans.
Which bank or lender will let me borrow?
Even though the choices are limited, we are still working with over 10 lenders who are willing to lend you money based on your overseas income. Choices include big banks, smaller banks, and non-bank lenders. Please contact us for more information, and depending on your personal situation and criteria mentioned above, we will give you recommendations accordingly. We offer a free financial strategy session where we discuss your financial situation and goals and provide you with the best way of structuring your loans in order to achieve your goals. We do this because we want to put our customers’ goals first.
Do I need a Power of Attorney (POA) for expat borrowing?
No it is not necessary, but having one can help save time. If you do not have an existing POA in place, you do not have to do so for the purpose of applying for a loan. But if you can have a POA (for example, your family member, your friend, or your solicitor), it will be very convenient whenever signing a document is needed. This will save you quite a lot of time and energy to fulfil the identity verification requirement, which will require you to attend the local Australian consulate or embassy to have identity documents witnessed.
When do I need to visit the Australian embassy or consulate?
If you don’t have a POA, then normally you need to attend the Australian embassy or consulate for ID certification at least once but may be twice. The first visit may happen at the submission stage as some lenders need you to get ID certification done by the Australian embassy or consulate. Not all lenders need it if alternative ID verification has been done previously by the bank or the broker.
The compulsory visit will happen when you sign the mortgage loan documents, which will be a part of the whole loan offer package. The disadvantages of visiting the Australian embassy or consulate is to find a suitable and available time, and sometimes it would be very hard, especially during the COVID time, and if the transaction is very time sensitive.
What are Is the alternatives to visiting the Australian embassy or consulate for an expat home loan?
Most lenders will allow your local Australian practicing lawyer to do the certification. But again, it’s not always easy to find a local Australian practicing lawyer. For certain countries, we have contacts of Australian lawyers. Please contact us if you need help in this regard.