Whether you an Australian expatriate wanting to:
- Purchase a home for when you return to Australia; or
- Review your existing loan to find a better deal and save money; or
- Build or expand your investment portfolio; you’ll need an expat mortgage broker in Australia to help you do that.
Because as you probably already know, expat lending is a complex area and choosing the right expat mortgage broker in Australia is key.
What other expat mortgage brokers won’t tell you?
An Australian expat looking to get a loan has to contend with a host of credit and non-credit issues, some of which we’ll discuss below.
- You won’t be able to borrow as much
- Overtime income, bonuses or commissions income are shaded
- Australian tax rates are applied
- Foreign spouse’s income is not used in serviceability
- Self-employed expats have an even harder time
- Some common non-credit issues
You won’t be able to borrow as much
Some of our expat customers are often surprised when they first hear just how little they’re able to borrow relative to their income. The way banks calculate serviceability (borrowing power) for expats means that this is often the case.
For example, right out of the gate, most banks will shade your foreign currency income by up to 20% to 30%. That means, they’ll generally only use 80% to 70% of your base income in their serviceability calculations. Only a select few lenders use 90%.
|Currency of your income||% of income used in serviceability|
|British Pounds (GBP)
Hong Kong Dollars (HKD)
New Zealand Dollars (NZD)
Singapore Dollars (SGD)
United States of America Dollars (USD)
Canadian Dollars (CAD)
|Japanese Yen (JPY)
Indian Rupee (INR)
Indonesian Rupiah (IDR)
Vietnamese Dong (VND)
Chinese Renminbi (CNY)
United Arab Emirates Dirham (AED)
|Other currencies||Case by case basis|
Furthermore, your debts and liabilities are assessed with an added buffer of 30%. Essentially, any credit cards, car loans or personal loans that you may have is assessed at its full available limit (whether you’ve used it or not), and a 30% buffer is added on top to account for exchange rate fluctuations.
These factors reduce your borrowing power to a significant degree. The key to borrowing as an Australian expat is applying with the right lender with favourable credit policies towards Australians living and earning overseas. E.g. one of our lenders will use the XE currency converter to convert your income to Australian Dollars (AUD) and use 90% of this income for servicing.
Overtime income, bonuses or commissions income are shaded
Apart from shading your base income, most lenders will ignore secondary income types such as overtime, bonuses, work-related allowances or foreign investment income such as dividend or rental income.
Among those who do accept this income, they’ll shade it twice; first they take 80% of the commission income and then shade your total income to 80% again, which essentially means they’re only using 64% of your commission.
Anecdotally, what we’ve seen is that work related allowance income form a significant portion of income for expats. Examples include motor vehicle, living away from home and shift allowances or penalty rates. Some of our favourable lenders will use 100% of that income while others may ignore it completely.
What’s more, lenders will not accept other niche income types such as stock options and/or restricted stock units. Applying with the right lender with favourable lending policy for expats is key to a swift approval.
Australian tax rates are applied
Many of our expats live and work in countries with no taxes such as the United Arab Emirates or in countries with lower taxes compared to Australia. However, lenders will still apply the Australian tax rates to your net income.
Luckily, there are some that will use foreign tax rates which allow you to borrow more.
These 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.
Foreign spouse’s income is not used in serviceability
For an expat married to a foreigner, not only is your spouse’s income not considered, some lenders won’t even consider your application.
Among those lenders that consider lending to expats with a foreign spouse, only the income of the primary earner who is an Australian citizen or permanent resident is used.
With a select few lenders, the foreign citizen’s income can be used on a case by case basis usually about 40%-80% of your spouse’s income. However, it is considered favourable if they have a visa to Australia. Some of our best lenders can use.
Case by case basically means the deal is first sent for review before submitting your loan application. This way, we can work out the strengths, weaknesses and mitigants of your situation and seek an exception to a policy if required.
Self-employed expats have an even harder time
Major lenders don’t work with self-employed expats. Even specialist lenders are a lot stricter as they’re considered higher risk.
Nonetheless, specialist lenders have specialised loans designed specifically for expats, which means the lending criteria are more favourable.
With a few select lenders, we’ve been able to use up to 80% of their self-employed income, but this is case by case. More than likely, you’ll only be able to use up to 70% of your self-employed income with a specialist lender.
In addition, you’ll require two years’ company financial reports/tax returns and six months’ bank statements showing business income being deposited into a bank account.
For self-employed clients from, say, Vietnam, overseas tax returns need to be verified by an Australian accountant signing a letter confirming their income. Whereas if the tax returns are from Singapore, then we can just use those tax returns as they are easy for bank’s credit assessors to understand.
Expat lending policies are complicated at best and especially for a self-employed expat. It’s best if you contact us to discuss your situation in detail.
What are some common non-credit issues?
Some common non-credit issues that expats need to consider:
- Verification of identity (VOI) needs to be carried out, either online or via the embassy consulate.
- Documents and tax returns need to be translated if other than English.
- The mortgage documents need to be witnessed at the embassy or the consulate. Almost half of all lenders don’t accept a Power of Attorney (POA). Among those who do, they will accept POA if the applicant cannot sign the Loan Offer Documents.
These things can easily derail your application leading to delays or the lender asking for more information.
Some things just comes from experience, and this is where our experience of settling hundreds of mortgages for expats has helped us ensure a smooth and stress-free experience.
We’ll take care of the non-credit issues and the bank process on your behalf. So, you don’t have to worry about it.
What to look for in an expat mortgage broker?
Great brokers aren’t all things to all people. They tend to focus on a particular market or niche. So, what you’re really trying to find is a broker with experience dealing with expats.
Asking the following questions should give you a good idea on whether or not he or she is a good fit for you.
- How many expats have you helped? Do you focus on expat loans?
- What are the most common issues with expat loans?
- How many lenders do you have on your panel? Generally speaking, you’d want at least 20 lenders on your brokers’ panel, but more is ideal.
- How many lenders did you use in the last 12 months? A good mortgage broker would have used at least 8 lenders.
- What have you seen your clients invest in that worked really well for them?
- What are the main risks that you see property investors face?
- Do you work with any buyers agents?
- What industry awards have you won or been nominated for?
- Do you have access to RP Data or another property data service?
It’s more about finding the one that works for you rather than finding the “best”.
How can we help you?
Expat lending is a complex area. So you want a broker with experience and expertise.
Our mortgage brokers have significantly more experience than other brokers in expat lending for which we’ve won multiple industry awards.
We’ve helped settle hundreds of mortgages for Australians living and working all over the globe but more particularly in the United States, Hong Kong, Singapore, United Kingdom, Europe and the Middle East.
Interestingly, our mortgage brokers pride themselves on being credit experts as opposed to being just salesmen. What this means is that they’re constantly on top of changing lending policies of almost 50 lenders that are on our panel. They also understand which lenders have favourable lending policies and appetite for expat loans at any given time. This allows our mortgage brokers to work out the strengths, weaknesses and mitigants of your situation and get an exception to policy when required.
Also, over the years, we have built up great working relationships with key decision-makers at the banks. This allows us to get deals on the fringes or unusual cases approved.
It also helps that we’re located in Sydney, New South Wales (NSW) where most of the bank’s headquarters are.
More importantly, we can also negotiate significant discounts (pricing discretion).
You can get your application assessed by one of our specialist expat mortgage brokers in Australia by calling us on 1300 889 743 from within Australia (+61 2 9194 1700 from outside of Australia) or by filling in our online assessment form.