Foreign Currency Mortgages
What are the foreign currency loan requirements?
Any foreign currency loan must adhere to all standard Australian lending criteria including proof of income, serviceability and Loan to Value Ratio (LVR).
On top of these requirements, there are number of measures that overseas buyers also need to conform to.
- The currency of the loan must match the currency of your income.
- Real estate used as security for an Australian home loan must also be situated in Australia.
- Foreign investors require Foreign Investment Review Board (FIRB) approval.
Can I borrow in a different currency?
Australian lenders require that the currency of the home loan must match the currency of your income.
If you are in the USA and buying a property in Australia then you can have a loan in United States Dollars (USD) but not in Euros.
Some lenders will require you to have a banking relationship with them in both the United States and Australia.
Typically this is for overseas investors buying a property in Australia.
How much can I borrow?
When applying for a foreign currency mortgage, you can only borrow a maximum of 60% of the property value.
There is no limit to how much you can borrow, so long as it remains below 60% LVR (Loan to Value Ratio), and meets all other standard lending criteria.
As an Australian citizen living overseas you may be able to borrow 95% of the property value with an Australian dollar (AUD) home loan. If you are a foreign investor you may be eligible to borrow up to 80% of the property value with an AUD loan.
Our mortgage brokers are experts in Australian home loans. If you are interested in finding out whether you are eligible for a mortgage, call one of our brokers today on our international number +61 2 9194 1700 or enquire online.
How will the exchange rate affect my home loan?
If there is a significant currency movement then you may need to provide additional security or pay down the loan. This ensures that the bank’s security position remains within acceptable guidelines.
For example, if a loan is $900,000 US and the property is worth $1,500,000 AU$ and the exchange rate is 1:1 then the LVR is 60%. In other words you have borrowed 60% of the value of the property.
However, if the AU$ drops so that each AU$ only buys 80 cents US then the LVR has changed. The loan in AU$ equivalent is now $1,125,000 on a property worth $1,500,000. The LVR is now 75%, which would not be acceptable to the bank for a foreign currency mortgage.
The bank would ask the borrower to either provide an additional real estate in Australia as security for the loan or to make a lump sum payment off of the loan to bring it back down to $900,000 AU$ equivalent.
In many cases, people would not have the extra money available so they would need to sell their property or refinance their mortgage.
We recommend that you seek independent financial advice before using Australian real estate as security for a mortgage in a foreign currency.
Alternatively, a less risky approach is to borrow in Australian dollars instead. This will also allow you to borrow more against the value of your property.
Which foreign currencies can I borrow in?
There are a number of currencies that you are able to borrow in. These include (but are not limited to):
- Canadian Dollar (CAD)
- Chinese Yuan (CNY) – restrictions and conditions may apply
- Danish Kroner (DKK)
- European Union Euro (EUR)
- Great British Pound Sterling(GBP)
- Hong Kong Dollar (HKD)
- Japanese Yen (JPY)
- New Zealand Dollar (NZD)
- Norwegian Krone (NOK)
- Swedish Kroner (SEK)
- Singaporean Dollar (SGD)
- Swiss Franc (CHF)
- United States Dollar (USD)
You may still be able to qualify for a mortgage if you earn an income in a currency other than the list above. Bear in mind that restrictions and conditions may apply, such as your borrowing limit being capped at 80% of the property value (Loan To Value Ratio):
- Bahrain Dinar (BHD)
- Brazilian Real (BRL)
- Bruneian Dollar (BRN)
- Chinese Yuan (CNY)
- Indian Rupee (INR)
- Indonesian Rupiah (IDR)
- Omani Rial (OMR)
- Macau Pataca (MOP)
- Malaysian Ringgit (MYR)
- Mexican Peso (MXN)
- Oman Rial (OMR)
- Papua New Guinean Kina (PGK)
- Philippine Peso (PHP)
- Qatari Riyai (QAR)
- Samoan Tala (WST)
- Saudi Arabian Riyal (SAR)
- Solomon Island Dollar (SBD)
- South Korean Won (KRW)
- South African Rand (ZAR)
- Sri Lankan Rupee (LKR)
- Taiwan New Dollar (TWD)
- Thai Baht (THB)
- Tongan Pa’anga (TOP)
- Turkish Lira (TRY).
- United Arab Emirates Dirham (AED)
- Vanuatu Vatu (VUV)
- Vietnamese Dong (VND)
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.
Which countries are eligible for a loan?
Foreign investors from most countries should be eligible for a foreign currency loan so long as they meet the lenders requirements. Note that although your country may be accepted, it is unlikely you will be able to borrow in your local currency. In these cases most people choose a loan in either US or Australian Dollars.
There are some countries that may not be considered due to known issues regarding tax.
Other countries may be subject to a trade embargo. As a result, borrowers from these countries are not eligible for any loan from Australia.
Can I borrow in Australia using my foreign real estate?
Unfortunately we cannot help you to obtain a loan in Australia using an overseas property as security. You will need to contact a lender in the country that your property is in, borrow in that country and then bring the funds to Australia.
You can use these funds from an overseas mortgage as a deposit on a property in Australia; however many Australian banks do not accept this method of financing your deposit.
What does APRA think about foreign currency?
The Australian Prudential Regulation Authority (APRA) doesn’t like the idea of foreign currency mortgages.
Although it hasn’t banned them outright, its prudential practices guide (PPG) states that banks face significant challenges when validating offshore income streams.
As good practice, APRA also said it would best for banks to discount offshore income when assessing a borrower’s capacity to borrow.
Most banks have taken this advice on board and stopped lending to foreigners altogether.
Luckily, some other lenders have taken a measured approach and simply limited borrowing limits and their list of acceptable currencies in order to mitigate this risk.
We know who these lenders are!
Apply for a mortgage
To find out whether you are eligible for a home loan in Australia, contact one of our knowledgeable mortgage brokers via our international number +61 2 9194 1700 or enquire online.