A home is one of the most expensive purchases that you will make in your life. Know the dos and don’ts before purchasing, and stay a step ahead.
Take a look at these mistakes that many Aussie expats make while taking out a home loan. We have solutions for you, too.
1. Overestimating Your Borrowing Capacity
While accessing your borrowing capacity, you might overestimate your borrowing capacity by forgetting to consider the currency you earn in and your salary structure.
Lenders do not consider all currencies equal. The most widely accepted foreign currencies in Australia are the American dollar, Canadian dollar, British pound, Japanese yen, United Arab Emirates dirham, Hong Kong dollar, Swiss franc, and New Zealand dollar. Lenders generally consider only a percentage of your income to protect themselves from fluctuating exchange rates. The more preferred your currency, the more likely your lender is to accept your currency.
Your lender will scrutinise your earning capacity when you apply for a foreign currency home loan. Different lenders will treat your foreign income in various ways, as per their credit policy.
The structure of your salary can also have a substantial effect on your borrowing power. Some lenders might ignore part of your income if it comes in the form of allowances, bonuses or commissions, while others might accept it.
- Choose an expat specialist mortgage broker, since you will need a lender with a favourable lending policy for expats. With some of our lenders, you will be able to borrow up to 90% of the property value. You want a lender that will accept as much of your income as possible when they calculate your borrowing power.
2. Not Considering Foreign Income Tax Rates
You might be living in a country that applies lower tax rates than Australia. If you do, and your lender applies the higher Australian tax rate to determine your net income, it will reduce your borrowing power.
- Some lenders will use your foreign tax rate but only when they can see tax withheld on your payslips. A mortgage broker specialising in expat home loans can help you find the right lender.
3. Ignoring Tax On Your Rental Income
If you are thinking of renting your investment property after buying it, then do you know your rental income will be taxed?
Ignoring the tax implications of rental property might wreck your financial plan.
The marginal tax rate on the taxable income for expats starts at 32.5% and it can be as high as 45%.
- Take the tax bill you might be liable for into account and seek financial advice to see if it is possible to minimise the amount of tax you pay.
4. Not Getting Foreign Investment Review Board (FIRB) Approval
If you are an Australian expat living overseas and buying an investment property with a foreign spouse as a joint tenant, then you might make the mistake of not getting approval from the FIRB. It is an Australian Government department that reviews applications from foreigners who want to buy or invest in a home in Australia.
- Read FIRB guidelines before looking for a property in Australia but you can only seek approval once you have decided on a property to buy. Working with a mortgage broker who specialises in non-resident loans can make things much easier.
Call our mortgage brokers on 1300 889 743 or complete our free assessment to discuss your situation now!
5. Foreign Citizen Stamp Duty
Many homebuyers are shocked to find out about this stamp duty charge. When an Australian expat purchases a home in joint ownership with a foreign national, then this will attract a Foreign Citizen Stamp Duty surcharge on half of the property value.
- Solution: Purchase the house in the name of the Australian spouse only, to avoid the Foreign Citizen Stamp Duty. You can read more about this on our one on title, two on loan page.
- Choose a mortgage broker with expertise in non-resident mortgages to navigate the many different policies.
6. Not Knowing The Market
One of the biggest mistakes expats make is being unaware of local market conditions – not knowing if the market is rising, falling or stable. Current market conditions affect the decisions you’ll need to make about property. It wouldn’t be a good idea to make low offers when the market is hot right?
- Know the market and follow news on the property market. If you want curated news, then you can also follow Home Loan Experts on social media platforms and subscribe to our newsletter for regular information.
7. No Long-term Planning
If you make the mistake of not thinking about your long-term goals before buying an investment property, you might regret it. You might decide to buy the property without settling on its purpose. Is it going to be a family home upon your return to Australia or is the house just a long-term investment? How long are you planning to live outside of Australia?
- Start your long-term financial planning before getting a home loan. Five years is an appropriate amount of time to compare home loan deals, as it is the average life of a home loan in Australia.
- Consider all the plans you have made for your future before buying a home. You don’t want to lock up your hard-earned money for an extended period when you could get better value by using it for something else.
8. Not Using A Buyer’s Agent
It’s easy to overprice a house, refuse a low offer, or give in too easily out of desperation when a property sits on the market for too long or a deadline for selling a home is near. Buyer’s agents know the market and can keep you from making such mistakes.
- Take the help of a professional who can get the best price for your property. Getting a buyer’s agent onboard will help you get your property a larger exposure while helping you negotiate a better deal and keeping you from making mistakes from not knowing the market.
9. Not Getting The Right Valuation
Get an accurate valuation of a property before you buy it, so that you know how much you’ll need to borrow to purchase it and will have a good idea about how to price it correctly when the time comes. An upfront property valuation report is simply an assessment of the property you wish to buy to determine its worth. You will need a valuation report when buying or selling a house, applying for home loans, refinancing and buying insurance.
The report will help you determine the fair market value of the property.
- aIt is a good idea to get a property valuation before you apply for a home. It will help keep your credit clear, move your home loan application faster and give you a rough idea of whether the property meets the bank’s lending criteria. Most of our lenders provide a free property valuation for our clients.
How Can A Mortgage Broker Help You?
It will be difficult for you to keep up with all the current credit policies and lending criteria while focusing on your job. Home Loan Experts’ brokers understand the complex process involved in getting an expat loan. Our people can help you file an application that meets all the guidelines and policies for a successful home loan – and find the right deal for you.
Talk to our expert mortgage brokers and find the lender that suits you best.
Call us on 1300 889 743 or +61 2 9194 1700 if you are outside Australia.
Complete our free online enquiry form to get in touch with one of our mortgage brokers and discuss your situation today!