Will I pay a higher interest rate?
Some banks do not allow people living overseas to qualify for discounted home loans.
As specialist mortgage brokers we can often successfully negotiate a substantial discount below the Bank Standard Variable (BSV) rate with some of our lenders.
You should not pay a higher interest rate for an Australian mortgage, unless you can’t provide evidence of your foreign income.
Will my currency be accepted?
Since you’re earning an income in a foreign currency, the first thing you’ll have to work out is whether your currency will be accepted. The most common currencies we deal with include:
- United States Dollar (USD)
- Great Britain Pounds Sterling (GBP)
- Euro (EUR)
- Singapore Dollar (SGD)
- Canadian Dollar (CAD)
- Hong Kong Dollar (HKD)
- Japanese Yen (JPY)
- Swiss Franc (CHF)
- New Zealand Dollar (NZD)
- Chinese Renminbi (CNY) – Conditions apply
For the above currencies, there is a good chance that we will be able to get you approved for a loan but what if you earn an income in a currency that falls outside of this list?
You may still be able to qualify for a mortgage although restrictions and conditions may apply, such as restricting your borrowing power to 80% of the property value (Loan To Value Ratio):
- Bahrain Dinar (BHD)
- Bruneian Dollar (BND)
- Danish Krone (DKK)
- Fijian Dollar (FJD)
- Indian Rupee (INR)
- Indonesian Rupiah (IDR)
- Kuwaiti Dinar (KWD)
- Macau Pataca (MOP)
- Malaysian Ringgit (MYR)
- Norwegian Krone (NOK)
- Oman Rial (OMR)
- Papua New Guinean Kina (PGK)
- Philippine Peso (PHP)
- Qatari Riyal (QAR)
- Samoan Tala (WST)
- Saudi Arabian Riyal (SAR)
- Solomon Island Dollar (SBD)
- South African Rand (SAR)
- South Korean Won (KRW)
- Sri Lankan Rupee (LKR)
- Taiwan New Dollar (TND)
- Thai Baht (TBH)
- Tongan Pa’anga (TOP)
- Turkish Lira (TRY)
- United Arab Emirates Dirham (AED)
- Vanuatu Vatu (VUV)
- Vietnamese Dong (VND)
If your currency is not listed then please contact us as some of our lenders accept almost any currency.
It’s important to keep in mind that investment policy changes on a regular basis including which currencies lenders will accept for the purposes of expats and foreign investors wanting to purchase property in Australia.
Please call us on 1300 889 743 (+61 2 9194 1700 from outside of Australia) or complete our free assessment form and we can tell you if we can get you approved.
Will I need a deposit?
Australians living abroad will typically need a 10% deposit plus extra funds to cover property purchasing costs including stamp duty, legal fees, mortgage set up costs and Lenders Mortgage Insurance (LMI).
This deposit must usually be in the form of genuine savings.
If you have a larger deposit or you already own real estate in Australia, then you can use equity as a deposit.
Better yet, you can buy a property with no deposit if your parents own a property in Australia and they’re in a position to act as a guarantor for your home loan.
Example of property purchasing costs
Let’s say you want to buy an investment property valued at $600,000 and you have a $72,000 deposit (borrowing 88% of the propert value).
Stamp duty for Victoria is around $31,000, transfer fees are $1,610, legal fees are $2,000 and bank fees would be roughly $500 (depending on the lender).
In this example, your so-called funds to complete would be $122,180 including your deposit.
This is just an example so we recommend that you try the property purchasing costs calculator to get more accurate figures for your location.
How can I prove my income?
If your payslips or foreign tax returns are in English then these can be provided as evidence of your income.
Most lenders will require three months bank statements to show your salary being deposited into your account.
Several of our lenders have specialist non-resident departments with staff that understand most common languages, so even if your documents require translation this is not normally a problem.
A valid work visa is required by several lenders as part of their verification process. This is waived if you are a dual citizen or can provided other evidence that you are permitted to work in that country.
What if I’m self-employed
If you’re self employed then there are only a few lenders that will accept your income.
It’s much easier to assess overseas PAYG income than trying to work out the income earned by a self-employed Australian expat.
We have a couple of options that may be able to assist depending on whether you have an accountant or not, the country you are in and the currency of your income.
You may actually be able to borrow up to 70-80% of the property value with a couple of our lenders if you can provide all of the following:
- 2 years personal and business tax returns.
- 6 months business bank statements.
- An accountants letter verifying your income.
The problem with tax rates
Some lenders will use Australian tax rates when assessing your income rather than the tax rate of the country that you’re living in.
Australian tax rates are some of the highest in the world and this can seriously reduce your ability to borrow the amount you need, especially when you consider countries like Hong Kong or Singapore which have low tax rates or the UAE which doesn’t require you to pay tax at all.
Luckily, there are some that will use foreign tax rates which allow you to borrow more.
These same lenders will only use foreign tax rates when they can see tax withheld from your payslips so the trick to getting the lender to accept these rates is to provide as much income evidence as possible.
This offer is only applicable to the following countries but please give us a call first because we don’t know how long this deal will stick around:
- United States Dollar (USD)
- Great Britain Pounds Sterling (GBP)
- Euro (EUR)
- Singapore Dollar (SGD) – Conditions apply
- Canadian Dollar (CAD)
- Hong Kong Dollar (HKD) – Conditions apply
- Japanese Yen (JPY)
- Swiss Franc (CHF)
- New Zealand Dollar (NZD)
- United Arab Emirates Dirham (AED) – Conditons apply
- Macanese Patacas (MOP)
What if I am paid in two currencies?
It’s not uncommon for Australians abroad to earn an income in more than one currency.
This is particularly true of professionals working at large multi-nationals with offices in many different countries around the world.
If both currencies are on the preferred or secondary currency lists mentioned above, then there are banks that will consider these income sources.
Bear in mind that a different foreign currency exchange rate will apply to each currency type which may affect your overall borrowing power.
If only one or none of the currencies you earn in are in either of the lists, don’t worry. We may still be able to get you approved for an Australian expat home loan.
Your borrowing power
Exchange rate fluctuations, foreign tax rates, negative gearing benefits and repayments on foreign debts can mean that calculating your borrowing power is quite complicated and will vary between lenders.
Most lenders will use:
- Somewhere between 60% and 90% of your actual income.
- Australian tax rates even if you are living in a country without income tax.
- No negative gearing benefits.
- Loaded repayments on your foreign loans.
As each lender has a different method of assessing your borrowing power we can usually find a solution.
What exchange rate do lenders use?
When converting your foreign currency into Australia dollars, most lenders will use their own exchange rate, which is more conservative than the current market rate for your currency.
If your foreign currency is not on the preferred or secondary list, the lender will either not accept your currency or apply a reduced rate from XE Live Exchange Rates.
Unfortunately, depending on your currency, this can have a big impact on your borrowing power.
Speak with us and we can let you know if we can negotiate with the lender on what method of foreign exchange they use.
Getting a home loan with a foreign citizen
If you’re married to or in a defacto relationship with a foreign citizen then this will affect the way that some banks see your application.
There are three ways that they could assess your application:
- Assess you both as Australian citizens.
- Assess you both as foreign investors.
- Use the nationality of the highest income earner to determine how to assess your loan
The problem is that if you are assessed as a foreign investor then only a small part of your income will be used and you’ll require a larger deposit.
With some lenders you will also pay a higher interest rate.
You can avoid this by apply with a lender that has favourable lending policy for someone in your situation.
Please call us on 1300 889 743 (+61 2 9194 1700 from outside of Australia) or complete our free assessment form and we can let you know which banks will accept your situation.
What about my foreign partner’s salary?
Most lenders will ignore the income of your partner if they are not an Australian citizen or Australian permanent resident (PR) holder.
However, this is a very grey area of policy and we have many clients that we have helped to get approved by making a case.
A lender may consider your wife or husband’s income in the following circumstances:
- They have a valid visa for Australia.
- They’re living in Australia.
- They have ties to Australia such as family or close relatives.
- You have children together.
- You are married or have been defacto for over two years.
- You’re the main income earner.
It’s best to call us to discuss your situation by calling 1300 889 743 or by filling in our free assessment form today.
Do I need a Power of Attorney (POA)?
If you’re overseas then it’s quite handy to have a trusted family member, friend or solicitor that can sign documents on your behalf. A Power Of Attorney (POA) allows them to do this.
Some lenders require you to have a POA that meets their requirements. They may require you to have a POA with a solicitor or a family member which may mean your current POA isn’t accepted.
Other lenders do not accept a POA! This can be a real hassle if you then need to have documents couriered overseas and then you need to attend the Australian consulate to have them witnessed.
It’s a good idea to ask your mortgage broker what the lender’s requirements are before you both decide on a lender.
When do I need to visit the Australian embassy?
No matter the case, you’ll need to have your ID certified at the Australian embassy or consulate in the country you’re living in.
However, if the lender won’t accept POA for your mortgage loan documents, you’ll have to visit the Australian embassy to witness the signing of the mortgage title.
If you’re purchasing a property as joint tenants, only one of you needs to go to the embassy as long as you can provide your partner’s passport.
The embassy is certifying that the document is true, not that it’s reflective of the person asking for the certification.
What are the costs involved?
The Australian embassy will charge a service fee for certifying or witnessing these documents.
These fees will vary depending on the country you’re living in so it’s best to check the specific fee schedule for your country of residence.
Just be warned that they can be in the hundreds of dollars.
Choose your lender carefully
The main problem faced by most Australian expatriates is that they have great trouble meeting the requirements to get their loan approved. Did you know that?:
- Some banks need to see your original payslips, tax returns and other documents prior to loan approval.
- There can be significant delays if you choose a lender that does not have a loan processing system that is designed to handle foreign addresses or foreign phone numbers.
- Many lenders will not approve a loan for more than 80% of the property value.
- Some lenders may require you to sign a formal loan offer at the nearest Australian Consulate.
- Several lenders charge higher interest rates if you are outside of Australia.
We are specialists in Australian expat mortgages!
Here are a few reasons why you should use our services:
- Many of our customers are Australian citizens or dual citizens living overseas who want to invest in the Australian property market.
- We will choose a lender that accepts your situation. This way, you can avoid many of the headaches associated with applying for a loan.
- Most of our services are free.
- We know over 40 banks & lenders.
Having an expert mortgage broker in Australia can make all the difference! Please call 1300 889 743 (+61 2 9194 1700 from outside of Australia) or enquire online and our team will contact you to discuss how we can help.
Is Australian government approval required?
No, Foreign Investment Review Board approval is not required, even if you are buying with a spouse who is not an Australian citizen (refer to the FIRB guidelines for more information).
Will I have to pay the foreigner stamp duty surcharge?
A surcharge on stamp duty and, in some cases, land tax applies to certain foreigners and visa holders depending on what state you want to purchase your property.
Luckily, Australians living abroad are exempt from these surcharges even if they’re not in the country at the time of contract exchange.
The rules around this may vary so it’s always best to double with your relevant state revenue office.
In particular, if you’re buying with a partner who is a non-Australian citizen, then you may want to consider just buying in your name.
If you’re a permanent Australian resident, rather than a citizen, then that’s an even stronger reason to check with your state revenue authority.
Australian expat case study
After a few years working at a large electricity and gas provider learning his trade as an electrician, 35-year-old Tom decided it was time for something more.
Applying for a senior position at a major building company in the United Arab Emirates (UAE), his skills and expertise saw him land the job and he and his wife, Tracey (a US citizen), moved to Dubai to start the next chapter in their lives.
Although Tom’s new income was enough to live comfortably, Tracey wanted to work and was soon able to get a position at a local hairdresser, the same work she had been doing in Australia.
With stable employment and a good salary supplemented with Tracey’s income, the couple felt they were in a good position to purchase an investment property in Australia.
Having found a property, and with a deposit of 18% of the purchase price, they approached their bank in Australia for a loan. Unfortunately, they were knocked back because most banks don’t accept UAE dirham (AED) currency.
Fortunately, they got in touch with a mortgage broker that specialises in Australian expat mortgages who was able to find a lender that would accept AED. In order to qualify though, they would need an extra 2% of the purchase price as a deposit since the lender would only lend up to 80% of the property value.
On Tom’s income though, they were soon able to save this little bit extra and qualify for an investment loan. The vendor was even willing to hold off selling the property until Tom and Tracey were able to sort out their finances so they were even able to purchase the prime piece of real estate they wanted.
When is the right time to invest in Australian real estate?
There’s an old saying when it comes to investing in real estate: it’s not about timing the market; it’s about time in the market.
This sentiment is often lost on first-time investors. Case in point was 2008/9, the period infamous for the global financial crisis.
Logically, it would have made for the Australian real estate market to have taken a dive during this economic turbulance but this isn’t what happened.
Market weakness in Australia’s capital cities was not felt (marginally) until 2011.
The point is, the years most people think will be a problem is not always the case.
All suburbs and regions move and fall at different times and volatility has historically been relatively low in Australia since 2001.
Ultimately, you cannot time the market and, over the long-term, you are better off moving quickly to invest in growth markets.
Apply for a home loan
We’re mortgage brokers who specialise in helping people overseas to buy property in Australia.
We have helped countless Australian expats buy a holiday home or invest in Australian real estate.
Our Australian mortgage brokers are based in Sydney, Australia but our services are available worldwide.
With a team of offshore credit experts located in Nepal, our mortgage brokers are available outside of standard Australian business hours so we can work with your timezone and personal schedule.
If you are an Australian expat, would like to buy a property in Australia and would like to know more about how we can help, then please contact us on 1300 889 743 during business hours (+61 2 9194 1700 from outside of Australia) or enquire online.