Home loans for Australians abroad
Home loans for Australian expats
Home ownership has long been the great Australian dream. But for an increasing number of Australians, another dream is living and working overseas for extended periods of time. And why not? You get to broaden your work and life experience by immersing yourself in another culture for more than just a holiday. What most ask though is whether you can chase both dreams at the same time? Can you get a home loan while you’re working overseas as an expat in preparation for your eventual return to Australia?
We understand there are wide variety of situations and living arrangements. We can answer these questions and plenty more for you, so feel free to get in touch via with any questions.
The short answer is yes. The good news is that if you’re an Australian expat is that some (though not all) lenders will approve you for a home loan while you’re living and working overseas, provided of course that you meet their normal lending criteria. If you’re an Australian citizen living abroad, you don’t require legal approval from the Australian government.
There are caveats, however. Generally speaking, most lenders will count a smaller portion of your overseas income towards a home loan for reasons of risk, protecting them against exchange rate fluctuations. Moreover, lenders have different policies regarding income of foreign de facto partners, which may limit your ability to finance the loan, in their eyes.
Lenders will want to know your income, debt amount and your capacity to repay the loan. Further considerations for lenders include for expat home loans include the potential for currency exchange rate fluctuations over time and the tax rate in the country where you’re earning your income.
Frequently Asked Questions
We go through a number of frequently asked questions about investment loans below. If you have any further queries or would like assistance in organising a guarantor loan, please get in touch for an obligation-free conversation about your needs.
Is Australian government approval required?
Unlike non-Australian citizens, you won’t need to obtain legal approval from the Foreign Investment Review Board to buy Australian property as a current expat. That’s one of the benefits of retaining your Australian citizenship.
How much can I borrow?
The loan-to-value ratio (LVR) for an expat home loan will generally be lower than an Australian currently living here will be able to get. That ratio is the amount you’re borrowing expressed as a percentage of the value of the property. For example, if a property is worth $600,000 and you need to borrow $450,000 to buy it, your LVR is 75%. LVR’s between 60% and 80% are generally available for expat home loans, depending on the lender.
With that said, some lenders provide an LVR of up to 95%. It’s important to note that the higher the LVR on any loan, the more loan risk there is for the lender. They’ll typically charge a higher interest rate accordingly, and may require you to take out mortgage insurance to cover your future repayments in case you’re unable to make them.
Will I need a deposit?
Yes.The minimum deposit you’ll need will be the difference between the property’s value and your lender’s maximum LVR. The lower your lender’s LVR, the more deposit you’ll need, and vice versa.
For example, again let’s assume the property you want to buy is valued at $600,000. If your lender’s maximum LVR is at the lower end of the scale (i.e. 60%), you’ll potentially be able to borrow up to $360,000 and you’ll therefore need a minimum deposit of $240,000 (plus closing costs, such as stamp duty). If you don’t have that much deposit readily available and you already have equity in another property, you may be able to use some of that as security instead.
On the other hand, if you’re lender’s maximum LVR is at the higher end of the scale (i.e. 95%), you’ll potentially be approved for a loan of up to $665,000. The minimum deposit you’ll need will be $35,000 (plus closing costs). But bear in mind that the more you borrow, the more interest you’ll pay. And it’s likely that your interest rate will be higher with a higher LVR, to cover the increased risk for the lender.
How is foreign income treated?
Most lenders will only accept a certain percentage of your foreign income (e.g. up to 80%) when assessing your capacity to repay an expat home loan. This helps to protect them against exchange rate fluctuations over the life of the loan.
What other evidence and documentation is needed?
The major consideration of lenders for expat loans is the same as for any other loan: your ability to make your repayments. They’ll need to be convinced of that. You’ll need to provide evidence of your regular income and most likely a letter from your employer confirming your position and the stability of your employment. The lender will usually verify this information independently with your employer.
It can be more difficult to get an expat home loan (or any loan) approved if you’re self-employed. If you are self-employed and the lender is prepared to accept you, their LVR will probably be lower than it would be for a person who isn’t self-employed.
You’ll also need to supply a copy of your passport and your working visa for an expat loan application. The visa will specify how long you’re allowed to live and work in your host country. Along with your credit history and current income/debt levels, this additional information helps the lender to assess the risk of your application.
What if my partner is a foreign citizen?
If you’re married or in a de facto relationship with a partner who is not an Australian citizen, this may affect the lender’s assessment of your loan, especially if your partner’s income is needed to service the loan repayments.
Some (but not all) lenders simply won’t accept the foreign income of your partner. This can severely impact the affordability of your loan from the lender’s perspective, and they may decline your application accordingly.
Can I qualify?
Some lenders may only approve expat home loans from Australians working in a country where we have an Australian embassy or consulate (i.e. where the Australian government has an office within the country to help look after its commercial interests and citizens where necessary). Fortunately, Australia has embassies and consulates in most countries around the world.
Provided you meet your lender’s criteria, you’ll be approved for an expat home loan. But these criteria differ among lenders.
As with any loan, lenders will assess your current level of debt and your capacity to repay the amount you need to borrow. Additional factors they’ll consider for an expat home loan include the potential for currency exchange rate fluctuations over time and the tax rate in the country where you’re earning your income.
And if the loan is for an investment property that you intend to negatively gear, you’ll also need to meet their criteria for that type of lending. For example, there’s a higher risk associated with investment properties when you’re relying on rental income to service the loan. That’s because there’s a chance the property won’t always have a tenant for the life of the loan. Lenders factor in that risk when determining your capacity to repay the debt and the interest rate they charge.
Will I pay higher interest rates?
Some lenders will charge you a higher interest rate and/or additional fees as an expat, but many won’t. Don’t forget that the mortgage market is very competitive. It pays to shop around to negotiate the best deal you can. Even a slight difference in interest rates and fees can make a significant difference over the life of a home loan.
Will my currency be accepted?
Major global currencies such as US dollars, the Euro and the British pound sterling will be accepted by many lenders. In addition, many will also accept currencies such as the New Zealand, Canadian, Singapore and Hong Kong dollars, the Japanese yen and the Chinese yuan.
However, currencies that have a history of being more volatile in foreign exchange markets will be viewed as a higher risk by the lender. Many lenders may refuse to accept certain currencies and your application in general, or they may charge a higher interest rate for the increased risk.
With that said, we know of at least one lender who is willing to accept all foreign currency income up to 90% LVR borrowing in some cases, so just contact us if you are unsure.
What if I earn in dual currencies?
This can be common for expats who work for large multinationals. If both currencies are commonly accepted by the lender, it shouldn’t adversely affect your application other than an allowance being made for exchange rate fluctuations.
But if one or both currencies are not accepted by the lender as part of their lending criteria, this will affect your borrowing power and make it harder for your loan to be approved.
Do I need a power of attorney?
Some lenders will require this, others won’t. Where a power of attorney is required, they can sign expat loan documentation on your behalf. Alternatively, if they aren’t required by the lender, these documents can be couriered overseas, but your signature will usually need to be witnessed at an Australian Embassy or Consulate.
How can I find the right Australian expat loan?
The choice of lender for an expat home loan is crucial. The terms and conditions that different lenders offer can vary significantly, so you need to do your homework (or have us do it for you), researching and comparing the pros and cons of all your options before you make a loan decision.
Why use a specialist non-resident mortgage broker like us?
As you can see, there are some unique considerations when applying for an expat home loan. We are experienced in this type of lending and can advise you to make your both decision and the application process as seamless as possible.
We take the time to understand your situation and recommend suitable lenders. Remember, we advise Australian clients and negotiate with Australian lenders for a living. We know the criteria that different lenders use when assessing expat home loan applications and we also know how to get you the best possible deal.
We’re also based here in the Australian market, while you’re currently living overseas if you’re working as an expat. We can save you a lot of time and hassle. We’ll advise you and help ensure your application and associated documentation gives you with the best possible chance of having your home loan approved.
Contact us today to discuss your finance needs.
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