If you’re an Australian citizen living and working overseas, it’s still possible to get a home loan to buy property in Australia.
Living and working overseas for a year or more is a rite of passage for many Australians, and even if your career or personal life has taken you overseas for a time, there’s a fair chance that you still call Australia home.
But what happens if you’re an Australian citizen living and working abroad, and you want to take out a home loan to buy property in Australia? Do lenders offer home loans to Aussie expats and will you be able to get a competitive rate?
The good news is that a wide variety of banks and non-bank lenders offer Australian expat home loans. However, there are certain terms and conditions attached to these mortgages that you should be aware of before you apply for a loan.
Home loans for Australian expats
If you’re an Australian citizen living overseas, you can apply for an Australian home loan to buy property or to refinance an existing loan. This type of lending is often referred to as expat lending, and while some banks won’t offer mortgages to Australians living abroad, there are plenty of lenders that can offer the financing you need. Some banks, for example ANZ, even have entire departments dedicated to managing expat lending.
The Australian property market offers a stable and secure investment opportunity for Aussie expats, so it’s important to compare a wide range of expat home loans to find one that meets your needs.
“An Australian citizen living and working overseas can certainly borrow for a purchase here,” says mortgage broker Derek Haas from Haas Associates Loans & Leasing. “The current publicity around ‘overseas investors’ really relates to foreign nationals looking to buy here, ie ‘non-resident’ citizens of another country.” So while there’s a widespread belief that expats will need to obtain approval from the Foreign Investment Review Board before they can buy property in Australia, this is simply not true.
The interest rates and fees for expat home loans are generally the same as those any Australian living here could access, but some lenders do charge higher interest rates. Specific terms and conditions also apply to these types of loans, so it’s important to compare your options before submitting an application.
How much can I borrow with an Australian expat home loan?
The amount you can borrow with an expat home loan really depends on the lender you select. Factors such as fluctuating exchange rates, foreign tax rates, any foreign debts you have and the impact of negative gearing all influence how much a lender is willing to let you borrow, with loan to valuation ratios (LVRs) ranging from around 60% to 80% available.
“Talking to a spread of lenders shows that an Australian citizens living and working overseas could borrow up to a possible maximum of 80% of the valuation/purchase price (the lesser of the two), with some policy issues to be addressed of course,” Haas says.
But while you can access a high LVR with some lenders, Jordan Papadopoulos from Pendo Finance explains that the LVR available for Aussie expats is generally lower than the amount an Australian citizen living and working in Australian could borrow.
“For example, if you have two clients looking to purchase the same three-bedroom home in Melbourne:
- Expat: Maximum LVR could be 60% with Lender ABC.
- Citizen: Maximum LVR could be 80% with Lender ABC.
“As a result, expats will be required to hold a much higher deposit and/or use equity from other properties owned within Australia,” Papadopoulos says.
How is foreign income treated?
One of the main issues to consider when you apply for an expat home loan is that you will be earning income in a foreign currency. A lender will need to assess your income and earnings capacity before approving your loan application, but each lender has its own approach to foreign income. Most Australian lenders will only accept a certain percentage of your foreign income, which allows a lender to protect itself against factors such as fluctuating exchange rates.
“PAYG applicants will need to be paid generally in one of the major currencies, for example,GBP, Euro or USD,” Haas says. “The lender here will take 80% of that income - some take 80% of net, some, 80% of gross - and use that for servicing the loan with generally no negative gearing benefits allowed for.”
Some of the commonly accepted currencies for foreign income when applying for an Australian expat home loan include:
- British Pound Sterling
- US Dollar
- Singapore Dollar
- New Zealand Dollar
- Canadian Dollar
- Hong Kong Dollar
- Japanese Yen
- Chinese Yuan Renminbi
There are several other worldwide currencies that may be accepted by your lender, but restrictions such as lower LVRs may apply. Some lenders will also only accept loan applications from expats residing in a country where there is an Australian consulate, so an experienced mortgage broker will be able to talk you through the ins and outs of expat lending criteria.
What other evidence and documentation is needed?
Just like with a regular home loan, you’ll need to provide proof of income to be approved for an expat home loan. “At a minimum we require six months of bank statements, your last two payslips and an employment letter, and an employment check will also be completed,” Papadopoulos says. “Most lenders will no longer accept self-employed income.”
Other supporting documentation required by most lenders includes copies of your passport and visa showing that you are allowed to live and work overseas.
What if I’m married to a foreign citizen?
So what happens if you’re married to, or in a de facto relationship with, a foreign citizen? If only the Australian applicant’s earnings are being used to service the loan debt, this won’t be an issue. But if both your and your partner’s income will be used to pay off the loan, this may cause problems with some lenders.
“If you are married you will automatically need to declare the marriage on the lending application. If you are married to a foreign citizen and the lender does not accept their income, this could potentially impact your approval,” Papadopoulos says.
Some lenders will refuse to accept any income from a foreign resident, while others will assess you both as Australian citizens or potentially class you both as foreign investors. This can have a significant impact on the interest rate you receive and the affordability of your loan, so it pays to enlist help from a mortgage broker with experience in the expat lending field. Your broker will then be able to match you up with a lender that offers a lending policy most suited to your situation.
It’s worth pointing out that even if you plan to buy Australian property with a spouse who is a foreign citizen, you will not need to receive Foreign Investment Review Board approval.
How to find the right Australian expat home loan
Applying for an Australian expat home loan is a perfect example of the benefits of a good broker, Haas explains. “With some lenders maxing out at 80% and others happy at 95%, choice of lender is important, and policy knowledge as well,” he says. “Slight variations in policy mean the broker needs to investigate the lender panel in detail to come up with the most suitable recommendation.
“My experience with these deals is that the end documentation process needs to be addressed at the start of the discussion with the broker. Once the loan is approved, how will the client sign the loan contract and mortgages? This can be done by way of a Registered and Enduring Power of Attorney, or documents can be couriered overseas but need to be witnessed at an Australian Consulate or Embassy.”
Some lenders will require you to have a power of attorney as part of the borrowing process, while others will not allow this. Maintaining all the necessary proof of income and visa documentation can help the application process run as smoothly as possible, and it’s essential to maintain good communication with your mortgage broker well in advance of your intended purchase.
Finding home loan financing for Aussie expats doesn’t have to be hard. With the right advice and guidance from an experienced mortgage broker, you can find a loan that meets all your borrowing needs.