Australian Expat Home Loans

How to get a property loan in Australia

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Buying a property is on everyone’s bucket list – it provides you shelter in a storm, warmth in the cold winter nights, light in darkness, and most importantly, a sense of freedom and security. While we all want to own a house and transform it into a snug and cosy home, many tend to be held back by the brutal housing market. But what if we tell you that there is a hassle-free method to invest in a suitable property?

Let us tell you the right way to choose the best property loan in Australia. 

Allow us to find you the perfect home loan.

Apply online to get expert recommendations with real interest rates and repayments.

A little more info for you

Most Aussies, foreign nationals and temporary residents wish to invest in a property that is worth their every penny. It is always wise to ask for opinion from professionals as we can help you buy your property of choice at the best price. 

Generally speaking, you could apply for loans when you have an LVR of 80% or less as the property itself serves as security. 

Property investors in Australia can claim 100% of their mortgage interest expense as a tax deduction and negatively gear their investment property. The property gives long-term returns when the property’s value increases over time. You can rent it out and receive rental income (essentially more money). 

As compared to an investment in the share market, investment in a property gives you full control. It is your property, and no one can tell you otherwise, so you can make investment decisions to maximise the value of your property and make the most out of it. You can also do certain things to repay the home loan quicker (we’ll get to that in a bit). 

Current lending market conditions

Different home loan options in Australia nowadays can confuse a lot of beginners which might put them off of getting one. If you are new to the real estate sector in Australia, you should reach out and have a discussion with us (it’s free). 

You must be fully informed and be aware of the minimum deposit Australian lenders accept and the amount you can borrow. Lenders will consider your financial situation and other factors to decide on how much they can lend you devoid of over-stretching your financial capacity.    

  • Mortgage interest rates are at the lowest point in history.
  • The Reserve Bank of Australia (RBA) has stated we will be in a low interest rate environment until 2024. Inflation rate is to be between 2-3% and job growth to return to pre-COVID levels before rates start to increase again.
  • You’re able to get a 30-year loan tenure regardless of age.
  • You’re able to do Interest-Only repayments with a slight premium, although the majority of clients are opting for Principal & Interest.

How Do You Get A Loan To Invest In Property?

Comparing the cheapest home loan interest rates in Australia is something we will help you do. You can talk to one of our mortgage experts so we can provide you with options that cater to your needs. 

Next up is to complete our quick online assessment, you will then receive a comprehensive assessment with your maximum borrowing capacity and lender options, with rates and fees.

Once you have decided to proceed with the home loan application, you will be guided through our quick and easy document collection process for application submission. We strive to provide you with the most stress-free experience.

Buyers would only be required to provide basic documents, such as passports, driving license copies, income certification letters and the first page of the house purchase contract. Up to 80% of loans are approved. The interest rate and product functions are precisely the same as those of local Australian customers.

Australia’s developed financial industry has made Aussie expats even more powerful, and some support is not even available for local buyers. If the buyer is allowed to only pay interest in the first five years, the principal can be put on hold temporarily, so the buyer can easily “provide a house with a house”; if the house appreciates, there will be no need to sell the house and do a reassessment. It is very convenient to cash out the value-added part, turning “dead money” into “living money” and realise a rolling investment.

Most Australian financial institutions provide 80% of housing loans with some financial institutions lending more than 80%, and 50-60% of the purchase price for commercial properties. But for loans higher than 80%, you must pay a certain percentage of mortgage insurance which may be quite hefty. This one-time fee goes towards the lenders for covering them when the borrowers do not make the repayments. 

Unlike many countries, the Australian housing loan interest rate can be divided into two types: Owner-occupied Housing Loans and Investment Housing Loans, depending on the purpose of the buyer’s purchase. The interest rate for investment housing loans tends to be slightly higher than owner-occupied housing loans. Generally, as an Australian expat, you will be buying for investment as you are not currently residing in Australia to live in the property. 

Everyone knows that housing loans’ interest rate is a susceptible number, but few people have studied how much difference this number will have.

According to statistics, the gap between the highest mortgage interest rate and the lowest mortgage interest rate offered by central Australian banks and lending institutions has reached 1.7% (30-year loan interest difference is as high as A$370,000!). This comparison is based on a quota of 1.024 million, close to the median house price in Sydney.
By choosing this loan method, the lender can repay the interest only for each repayment within five years. The amount is relatively low and it will be completed at maturity. This kind of repayment method is suitable for buyers who are purchasing for investment purposes. Investors expect that real estate will increase rapidly. In three to five years, the value of houses will skyrocket. 

Once the investment expectations have been reached, they will be resold for profit. Throughout the investment period, investors only need to pay a small amount of interest to complete the investment.

Home Loan Rates Australia

More than 70 banks and financial institutions in Australia are giving loans, and nearly 80% of customers are choosing the four central banks. 

This is despite the four central banks in Australia having a higher average housing loan interest rate. You can check the current interest rates for the big four banks here.

Relatively smaller banks and small lenders often offer relatively lower mortgage interest rates, as is required to compete with the large network effect and online banking capabilities of their larger competitors. Oftentimes, these smaller lenders offer a better cost-saving alternative and should not be ignored. 

The Australian Competition & Consumer Commission (ACCC) released an interim survey report on the lending rates of Australia’s four central banks and Macquarie Bank (Macquarie) and found that the mortgage information released by significant banks to mortgage customers was “not transparent”, hence before you make a quick decision to go with the big banks, do come to us and see whether you would benefit more by borrowing from lesser known lenders

Cheapest Home Loan Interest Rates in Australia

On November 3, 2020, the Reserve Bank of Australia (RBA) announced the lowering of the official cash rate from 0.25% to 0.1%, a record low. The purpose of the interest rate cut is mainly to stimulate the economy out of the technical recession caused by COVID-19 epidemic. 

Traditionally, Australian housing loans are mainly floating rate (variable) loans, which can be linked to offset transaction accounts. Variable loans can also be refinanced at any time, as opposed to fixed loans which have “locked-in” terms with break-cost penalties.

Since the November 2020 rate cut, all four major Australian banks, Commonwealth Bank (CommBank), Westpac Banking Corporation (Westpac), the Australian and New Zealand Banking Group (ANZ) and the National Australia Bank (NAB) have reduced interest rates substantially on their fixed-rate and variable-rate mortgage products.

Smart and successful lenders in Australia have their own metrics and qualifications for assessing the loan applicants. They focus on so many important aspects of the home loan applicants and follow different terms and conditions. There is no specific formula or rule on how much the home loan applicant will be approved for. 

Some of the important factors Australian lenders consider while deciding whether the applicant is qualified for the loan are the borrowing capability of the applicants, purpose of the loan, property prices, credit history, and other things. Our articles on how to maximise your borrowing capacity as an overseas resident earning foreign income is a must-read.

Home Loan Calculator

Use different calculators to help you calculate your ability to borrow, the cost of house decoration, monthly payment and stamp tax. 

Our online home loan calculators can provide you with a complete guide and will provide suggestions on how to make an informed decision to qualify for a home loan. You will get a basic idea on home loan which would help clarify some doubts you might have.

Try our:

Mortgage Repayment Calculator

Borrowing Power Calculator

Investment Property Calculator

Stamp Duty Calculator  

Guidelines for qualifying home loan in Australia these days catch the attention of everyone and increase their overall interests to directly submit an application for a home loan. There are several things you should pay attention to: your credit history, commission as income, mortgage brokers, proven savings, affording repayments and credit card transactions. We will save you the hassle and have a thorough inspection of all your documents while appraising your application and help you decide on which home loan to go for. 

Can Foreign Nationals Get Property Loan In Australia?

The Australian government has always been supporting the real estate industry as it is one of the primary pillar industries in the Australian economy. One of the most important policies is encouraging people overseas to buy Australian real estate as part of their investment portfolio.

When you buy a house in Australia, you can enjoy the same policies as Australian residents, that is, national treatment. As long as the buyer is not a person that the Australian government considers harmful to the national interest and the property purchased is not a historic property that is prohibited from being sold on the Australian historical and cultural heritage list, your application is usually approved within two weeks. From this point of view, the requirements for overseas buyers are very lenient. They can choose where to buy, what to buy, and how many sets to buy.

Note that Australia restricts the types of properties that foreign buyers can hold. For example, foreigners can only buy off-plan and first-hand new houses; international students can buy homes, but they can only live by themselves and not rent out if there is no identity or stay after the visa expires. If you start working, you must sell the property.

The only real difficulty is from a financing perspective. While the Australian government is largely fine with foreign nationals buying properties, the banks and lenders have to follow stricter guidelines on who they can lend money to – for this reason, it has become tougher for those without Australian passports to get loans. Most foreign nationals should prepare for an LVR of 60-70% with slightly higher interest rates or fees. 

 

Final Words

The process of applying for a loan and buying real estate in Australia while being away from home can be quite confusing and daunting, but don’t you worry. We are here for you and will  guide you through the process. We will work out which lender can offer you the best interest rates and terms and conditions and advise you of your prospects of obtaining finance so, we got your back.

Start your home buying journey with Odin Mortgage.

Apply online to get expert recommendation.

A Complete Guide to Purchasing an Investment Property in Australia

A Complete Guide to Purchasing an Investment Property in Australia

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Australia, a developed tourism country, is rated as one of the most livable countries globally and is known for its high standard of living. In 2021, Adelaide, Perth, Melbourne and Brisbane all featured in the top ten most livable cities in the world list.

Beautiful beaches, dense tropical rainforests, undulating hills, more than 3000 hours of sunshine throughout the year, significant sports and cultural activities, national parks and wild animals. These precious natural and human environmental resources in Australia are features that attract investors from all over the world. 

Property investment is one of the best ways to build wealth. However, it is a long-term commitment, so it’s important that you’ve done your research before dipping your feet in the real estate waters.

If you’re thinking of purchasing an investment property in Australia, read on and learn about the ins and outs! 

Reasons To Invest In Australian Property

Here are some reasons why you should invest in Australian property:

  • Population growth

When it comes to real estate investment, one of the main factors you need to look into is the population of the place. In Australia, the population is on the rise in major cities like Sydney, Melbourne and Brisbane. 

The vacancy rate in Australia is meagre now, with less than 2% vacancy rate. With low-interest rates and rapid population growth over recent years, the demand for housing is way more than the supply. As long as the property rental price is reasonable, it will be more popular, ensuring both rental and capital growth for investors.

  • Steady growth in property market

Investors are drawn to invest in Australian property because of rental growth. For years, Australia has enjoyed steady rental growth while achieving capital growth. 

Sydney’s current average rental output rate is 5% (annual rental income as a percentage of house prices) (data source RP-DATA Rismark). The rental income can be roughly the same as the cost of holding the property, and some even have pure cash flow income.

According to statistics provided by Australia in the past 120 years, Australia’s real estate market is of lower risk compared to real estate markets of other countries. Property prices have been appreciating at an average annual compound growth rate of 6.8%. 

  • Consistency

Australia’s real estate market is one of the most consistent property markets in the world. It has an average ROI of 7% per annum. Not just that, it also has fewer years of decline in comparison to other property markets worldwide. For over 100 years, Australian properties have enjoyed a consistent rise in the capital. 

  • Easy to invest

Another good reason is that it is easy to invest in properties in Australia. Unlike other countries, Australia does not have strict foreign investment laws, making it easier for investors to invest in the Australian property market. 

Here are some things you should be aware of:

  • Australia has effective and strong consumer protection legislation through the National Consumer Credit Protection Act 2009 (NCCP Act)
  • The legal system in Australia is similar to the UK system
  • It is expected that the immigration trend in Australia will rise in the coming 50 years. 
  • Tax deduction policy: Although the seller must pay VAT after the property is sold, Australia’s tax law has a very generous deduction policy. Most of the expenses incurred during the purchase period can be offset by the income tax.
  • Loan policy: Many Australian banks provide financial products that help overseas investment and lending, including loans that only pay off loans with interest.

Australia has witnessed economic growth in the last 8 to 10 years. Many of the foreign property markets such as the United States market and the Hong Kong market have suffered major losses in the past, with some volatile economies witnessing a price drop of up to 70% in the housing industry. The Australian market, on the flip side, remained undefeated. 

The Australian property market provides investors the confidence they need to invest. For long-term investment commitment, the Australian property market could be the best option for you. The low volatility of real estate in Australia makes it a desirable choice over other property markets and even stock markets around the world. No matter which country you are from, you are welcome to invest freely in the Australian property market.

Investment Property Tips Beginners

Evaluate your finances and budget

Ask your bank to receive a statement of your credit card, and make sure you clear your outstanding debts. If your credit is not in a good place, now may not be the best time for you to buy a house or investment property. Lowering your credit card limit will help you obtain a larger financing limit.

  • Think about the total cost 

Deposit: You typically need to take out a 10-20% deposit to guarantee the mortgage. To avoid paying the lender’s mortgage insurance (LMI), a 20% deposit is required. Low deposit mortgages exist, but your mortgage insurance will be much higher.

Stamp Duty: The amount of stamp duty you pay depends on the state your property is in and the property’s purchase price. You can use the stamp duty calculator to get a specific quote.

Legal and Transfer Fees: Depending on the amount of legal work required for property transfer and other standard inspections, you should set aside AUD$2,000-A$5,000.

Financial and Insurance Expenses: If your loan exceeds 80% of the purchase price, you will need to pay for Lenders Mortgage Insurance.  

A mortgage loan application may cost anywhere between A$200 and A$600, depending on the lender. If you get a loan as part of a package this will often be waived. 

  • Be mindful when choosing the location and property type

Consider making a list of all non-negotiable, “must-have” requirements. The following is a sample list of those who want to become a homeowner.

  1. Location – close to work, school, family, and friends
  2. Public transportation, services, and shops
  3. Does the area have a mature infrastructure or development plan?
  4. Suburban features – is there a good atmosphere and friendly community?

When buying an investment property, the factors to consider are a little different from buying a house. Determine whether you want to fix it up, turn it over, hold the property or rent it out.

When choosing the type of property to invest in, a different set of criteria is required. Look for the following categories of properties while investing:

  • Look at housing prices in areas with higher rental yields
  • Research recent sales prices to understand prices
  • Is the rental demand strong? See if the vacancy rate is tight
  • Are there upcoming developments or zoning changes? What impact will they have?
  • Is it close to schools, shops, hospitals, or public transportation?
  • What will the maintenance cost be?
  • How many bedrooms, bathrooms and parking spaces are there?
  • Property inspection is important!

Ask a qualified inspector to conduct an assessment of the property. They will look for structural defects, pests, faulty wires, plumbing and drainage problems, asbestos, lead paint, etc.

Additional Incentives

Compared with some countries’ cumbersome investment policies, the entire approval process for investing in Australian property is relatively simple. 

Most real estate and land in Australia are generally sold and transferred in the form of ownership (ie: buyers have indefinite ownership of the land or house). Owners have the right to live, rent, sell, transfer the ownership or leave it vacant.

First Homeownership Grant

Are you eligible for the first home owners grant? If you and your partner have never purchased a property before, you will likely qualify for a “First Home Buyer Grant” (FHOG). 

FHOG is a nationwide program, but each state has its funding and the amount varies from state to state.

The government will determine whether you can get the subsidy based on whether you have previously purchased a house or investment property and whether your spouse or partner has also purchased a home or investment property. 

FAQs

What are the characteristics of the Australian Real Estate Market? 

Answer: Social stability, sound policies, the proper legal system, mature market, stable appreciation, active rental market, low vacancy rate and a chronic shortage of housing supply. 

Can foreigners buy Australian houses with loans?  

Answer: Yes.The Australian government encourages foreigners to invest in their real estate. Overseas investors can mortgage the properties they want to buy with Australian banks. 

After an investor purchases an Australian property, would the property lease’s rental income by subject to relevant taxes? 

 Answer: Yes. According to local laws in Australia, any income earned in Australia must be taxed. However, this income is the net income after renting. Therefore, it is recommended that investors take a loan from an Australian bank when buying Australian real estate to deduct the rental income to the greatest extent. At the same time, Australian accountants will use the various expenses of the property. With tax deductions, investors can maximise investment income.

Start your mortgage journey now.

Apply online to get expert recommendations with real interest rates and repayments.

The basics of the Loan to Value Ratio (LVR) in Australia

The basics of the Loan to Value Ratio (LVR) in Australia

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Your Loan to Value ratio (LVR) is simple to calculate. You divide the mortgage amount by the appraised property value and express the answer as a percentage. Easy. Getting a favourable ratio matters a great deal as it plays a substantial role in deciding whether your home loan gets approved, what rates are available, and whether or not Lenders Mortgage Insurance (LMI) is payable. Sounds somewhat complicated, but don’t worry – we are here to help you understand all these things so you can confidently move forward with your mortgage journey.

What is an LVR?

The LVR is a common term in the mortgage industry. It is a calculation which determines the deposit required for a purchase or how much equity you currently hold in your property.

The LVR expresses the ratio of a loan amount to the actual purchase price or valuation of your property as a percentage. Essentially, the lower your LVR, the larger your deposit has to be or the lower your LVR, the greater the equity you have in your property.

Lenders in Australia place a heavy emphasis on the LVR when assessing your loan application. Borrowers with an LVR of 80% or below will have a higher chance of getting an approval and will likely get a better interest rate. 

Borrowers with LVRs of 80% or above are considered higher risk to the lender, and Lenders’ Mortgage Insurance (LMI) may need to be paid to protect lenders from a potential default, which increases the cost of the mortgage. With that being said, LVRs as high as 95% are available given the loan will be mortgage insured. We explain more about Lenders Mortgage Insurance here (LINK TO LMI BLOG)

It is also possible for a borrower to have an LVR of 100% or above (no deposit required). If you do not have enough savings, this is an option as long as you have a security guarantor who is a parent or close relative (subject to lender) who is able to offer you a property to use as security.

In general, low LVR loans carry with them lower rates for borrowers as they are in the low-risk category. A higher LVR loan will typically attract slightly higher rates. It’s also important to point out that despite this, lenders are still happy to consider higher-risk borrowers such as those with:

  • Low credit scores
  • High debt-to-income ratios
  • Previous late payments in mortgage history
  • High loan amounts or cash-out requirements
  • Insufficient savings
  • No income

LVR calculator

Let’s say, your property costs $600,000 and you would like to borrow $480,000. Your LVR would be: ($480,000 ÷ $600,000) × 100% = 80%.

As mentioned previously, the lower the LVR, the higher the chance that the loan will be approved from a lower risk standpoint. The interest rate is likely to be lower also. 

Here’s another example. 

Your property costs $600,000 but now, you only intend to borrow $300,000. Your LVR would be ($300,000 ÷ $600,000) × 100% = 50%, significantly lower than 80%. By increasing the amount of money you put in, the LVR could effectively be lowered. 

Basic LVR Formula

The main factors that impact LVR ratios are the amount of the deposit you put in, purchase price, and the appraised value of a property. 

PRO TIP: 

A property value is typically determined by an appraiser or valuer, or the unconditional arms-length transaction between the vendor and purchaser.

In general, banks use the lesser of the appraised value and purchase price when the property is purchased.

Which One to Choose: Purchase Price Or Valuation Price

You may wonder how the LVR is calculated when the purchase price and valuation price is different. Here are a few notes that might address the questions you have in mind and clear things up for you:

  • Australian Lenders and Mortgage Insurers

Lenders and insurers use either the purchase price or the valuation price, whichever is lower, when determining the LVR. This situation is common in off the plan purchases as the value of the property may have changed from the date of which the contract was signed. It is also common in a hot market when competition is fierce and pushes the sale price higher.

Some lenders consider the valuation price rather than the purchase price to calculate the LVR when the contract of sale to purchase the property was signed more than 3 months before the date of application of your loan. 

For example, if you bought a unit off-the-plan for $500,000. When you are close to settlement and some time has passed since initial signing, the valuation becomes $600,000. The LVR would then likely be calculated using the latter price.

What’s good about a higher valuation is that you will not be required to pay as high LMI premium (if LMI was payable in the first place), or you might not even need to pay for any at all, which is why having a valuation done close to settlement could help you maximise your borrowing power and get a better deal.

  • What if I am buying a property from my family?

You generally still have to pay stamp duty on the market value of your property and potentially capital gains tax (CGT) as well. It is important to know the proper way to transfer property within your family and to avoid being charged hefty fees when thinking about any kind of property transfer (we can help you with that!) 

  • How do lenders calculate the LVR if I am refinancing my property?

The lenders’ valuation of your property will be used to calculate the LVR. Your actual purchase price may become irrelevant as you have likely purchased your property some time ago and possibly even renovated or added value to the property. The purchase price may also become irrelevant if there are house price fluctuations.

  • Is my property always valued by lenders?

Not always. For properties being purchased that meet particular criteria, property valuation may not be required. A physical valuation is always more expensive and time-consuming than the ones that are automated.

The method of valuation ultimately comes down to your LVR and the overall risk of your application. Refer to the section below regarding the criteria.

When will a Valuation be Required?

Some Australian lenders do not need a property to be valued when it meets certain criteria. They may adopt the actual price for calculating the LVR instead in the following situations:

  • LVR is equal to or less than 80%
  • Loan is under $800,000
  • Property is being purchased 
  • Property located in a major regional centre or capital city 
  • Property purchased via a certified real estate agent 
  • Property is not a new dwelling (off the plan or new building)
  • Vendor not related to potential borrower 

Allow us to find you the perfect home loan.​

Apply online to get expert recommendations with real interest rates and repayments.

What is the Maximum LVR that I can Go For?

The maximum LVR that the Australian banks let you borrow depends on:

  • Home loan amount required
  • Property location
  • Credit history
  • Loan type applied for

Most lenders require borrowers with high LVRs (>80%) to be Australian citizens, which means that the maximum LVR for foreign nationals is 60% – 80%. 

PRO TIP:
Non-residents who wish to buy property in Australia must apply to the Foreign Investment Review Board (FIRB) for approval and are only allowed to buy certain types of housing. 

Lenders tend to implement stricter regulations on non-residents. Loans for foreigners also typically have substantially higher interest rates than regular loans.

Can I borrow 100% LVR?

There are three ways you could borrow 100% LVR (or somewhere close to 100%). 

Method 1 – Family Guarantor home loan

This method doesn’t require you to have any existing properties. You will have to find a guarantor to support your loan application. 

The guarantor can be a family member or a close relative (depending on the lender’s policy) with sufficient equity in their property. The guarantor does not help you repay your loans but uses a portion of their property to secure a portion of the home loan being applied for.

The guarantor’s security doesn’t cover the entire loan amount, just a portion of it. This is usually the amount needed to reduce your LVR to 80%. In this case, you will not have to pay Lenders Mortgage Insurance.

Note that a guarantor may not be required (and removed) when you make additional repayments or when the value of the property increases. The LVR would then be low enough for the banks to accept it devoid of guarantors security requirements.

Method 2 – Releasing Equity (Top-up/cash out) from an existing property

If you have an existing Australian property, you can offer that property as additional security and the bank will allow you to borrow against that property up to 80% of its value.   

Example:

  1. You have an existing property worth $500,000 with a current loan balance of $150,000.
  2. The bank will allow you to borrow up to 80% of the value so a maximum potential loan of $400,000.
  3. You top up your loan from $150,000 to $400,000 which is a $250,000 cash out or equity which you then take and pay for the remainder of the first purchase 

 Method 3 – Lender’s Mortgage Insurance (LMI)

You can borrow up to 95% of the property’s value by paying LMI to the bank. If you borrow 80% or lower, there is typically no LMI fee payable.

If you borrow 90%, the LMI fee would be approximately 2 – 3% of the property value and gets added on top of the loan amount. 

In the case of the $1,000,000 purchase, you could borrow $900,000 by adding a $20,000 – 30,000 LMI fee on top of your loan. So your total loan amount would be $920,000 – 930,000.

Paying LMI is only something we’d recommend if you can’t do the first two methods, you don’t have sufficient savings/deposit, and you want to enter the property market sooner rather than later.

What is LMI? When is it Relevant?

Lenders Mortgage Insurance (LMI) is a lump sum, one-off payment you pay to the lender in case you default on your mortgage and the property sells for an amount that’s less than the value of the mortgage. 

Although the property itself serves as security for the loan, after taking all the additional costs into account, the amount that the property sells for may not be sufficient to cover the debt. In this case, lenders would recover the shortfall (ie:  the difference between the property price and the size of the mortgage).

We can’t tell you how much you will have to pay for the insurance as different lenders have different policies, but as a rule of thumb, the higher the percentage of the loan you take out (as compared to the value of the property), the more you will have to pay. Most lenders require you to pay LMI when they lend more than 80% of the value of the property. 

There are a couple ways you could get a loan with a reduced LMI:

  • get a guarantor 
  • capitalise the cost of LMI (ie: add the cost of LMI onto the principal of the loan) 
  • save a bigger deposit 

As always, talk to us at Odin Mortgage so we can help you save the most money! 

Is my LVR considered “high-risk”?

Australian lenders consider any loan with an LVR of over 80% high risk. LMI is required for minimising the loan-related risk so that the lender can approve the loan without the risk of losing money. 

You can use an LMI calculator to estimate the premium you will have to pay when you are taking out a loan of more than 80% LVR.

Why is my LVR Restricted by the Bank?

Australian banks use the LVR to manage the risk of the loan applications received from potential borrowers. They put a cap on the maximum LVR when the borrower is a high-risk one in order to reduce the risk of the home loan. 

Even if you have obtained pre-approval for a loan of a certain LVR, you may only be approved with a substantially lower LVR if the property is:

  • Difficult to sell – likely to take six months+
  • Remote location
  • Relatively unique
  • With restrictions, e.g. serviced apartments, display homes and heritage-listed properties

Use different tools online!

Most beginners to home loans are not aware of all the upfront fees and costs associated with property investment. If you have not taken these costs into account, then you may have less money left for deposit. You can access our savings calculator, home loan deposit calculator, and repayments calculator below to ensure you are well prepared in your home loan journey.

The savings calculator is designed to help you find out how long it will take to save for your home. 

The home loan deposit calculator helps you work out how much deposit you will have after deducting the upfront costs. 

The stamp duty calculator helps you calculate the amount of tax charged by the Australian State and Territory Governments.

Ready to purchase a property in Australia but not sure where to start? 

Fear not! 

Contact us for a free consultation on all mortgage matters. Just tell us about yourself, your plans and your finances, and we’ll give you real numbers and interest rates – not just our best guess. We are here to help you buy a home.

Find out who can witness your Australian Mortgage Documents while overseas as a foreign resident.

Find out who can witness your Australian Mortgage Documents while overseas as a foreign resident.

5-MINUTE READ
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Who Can Witness Your Australian Mortgage Document Overseas?

Your loan contract from the lender will often come with several other documents, most of which require your signature.

Collectively these may be referred to as your Mortgage documents. There is, however, one set of government mortgage documents that require specific witnessing, and depending on your location at the time of signing; requirements may be tricky and sometimes impossible to meet.

Horror stories exist where foreign residents are left unable to settle their mortgage due to improper certification of documents while overseas.

​Read on so you and your lender will be ready when it comes time to drawdown.

What is a Mortgage Document?

It is often the case that you may not have sufficient funds to purchase (real estate) properties. You may borrow funds from a bank or a lender (i.e. apply for a mortgage with the bank) to fund your purchase.

Mortgage documents are therefore required to be entered into between you and your lender to reflect the mortgage arrangement.

Mortgage documents generally contain the following information:

  • details of you and your lender;
  • description or address of the property;
  • details of your mortgage arrangement between you and your lender;
  • details of an independent witness who witnesses the execution of the documents.

Mortgage documents must be prepared and signed in an approved form under the Transfer of Land Act (VIC), Land Title Act 1994 (Qld), Real Property Act 1900, or any equivalent legislation depending on the location of your property.

Your lender’s solicitors will usually prepare all mortgage documents within a week of your loan is formally approved.

Who can witness your mortgage documents?

Mortgage documents must be signed and witnessed by a ‘qualified witness’. Generally, an ‘Australian lawyer’, ‘Notary Public’, or ‘Consular officer’ are approved and qualified witnesses under the relevant laws and legislations.

Other than sign and witness your mortgage documents, your Australian lawyer will also need to verify your identity – therefore, remember to bring your identity documents (e.g. passport and another form of identification with a photo) when seeing your lawyer.

If you happen to be in Australia at the time of signing your mortgage documents, the restrictions are a lot more lenient. See below table on general requirements as a guideline.

Witnessing requirements if residing in Australia:
State Requirement (if residing in Australia)
New South Wales Anyone over the age of 18 that is not a party to the loan.
Victoria Anyone over the age of 18 that is not a party to the loan.
Queensland An Australian lawyer, Notary public, or Consular officer.
Western Australia Anyone over the age of 18 that is not a party to the loan.
South Australia Anyone over the age of 18 that is not a party to the loan.
Tasmania Anyone over the age of 18 that is not a party to the loan.
Norther Territory An Australian lawyer, Notary public, or Consular officer.
Australian Capital Territory Anyone over the age of 18 that is not a party to the loan.

Witnessing requirements if residing in Overseas:

State Requirement (if Overseas)
New South Wales An Australian lawyer, Notary public, or Consular officer. Depending on the lender, anyone over the age of 18 that is not a party to the loan.
Victoria An Australian lawyer, Notary public, or Consular officer. Depending on the lender, anyone over the age of 18 that is not a party to the loan.
Queensland An Australian lawyer, Notary public, or Consular officer.
Western Australia Consular officer only
South Australia An Australian lawyer, Notary public, or Consular officer. Depending on the lender, anyone over the age of 18 that is not a party to the loan.
Tasmania An Australian lawyer, Notary public, or Consular officer. Depending on the lender, anyone over the age of 18 that is not a party to the loan.
Norther Territory An Australian lawyer, Notary public, or Consular officer.
Australian Capital Territory An Australian lawyer, Notary public, or Consular officer. Depending on the lender, anyone over the age of 18 that is not a party to the loan.

Mortgage Witnessing FAQs

Generally, the answer is ‘No’. The witness must be ‘qualified’ as prescribed by the relevant laws as prescribed by the state in which the property is located.


Always check with your broker or lawyer to ensure your mortgage documents are signed and witnessed correctly!

Unless your lender expressly advises you not to date the document, you may date the mortgage document the time that you signed it.

A simple question with a complex answer. Each individual will be different, and we go into detail with examples on how much you can borrow, how to increase your borrowing power and more in this article ‘How Much Can You Borrow?’.

Yes, there are no issues with that. Just remember the witness must be a ‘qualified’ witness as prescribed under the relevant laws.

Yes, you must sign in the presence of your witness. In other words, do not sign the document at home before you see your witness. This is to ensure the documents are valid.

Yes, most banks ultimately require original documents. However, it is always good practice to first scan and email the signed documents to your broker or bank’s legal team before providing the originals to them to ensure it’s signed correctly.

The last thing you want is to post the documents only to find out 1-2 weeks later that they were done incorrectly and need to re-do causing a delay in settlement and potential penalties.

How to correctly witness a signature.

Before signing any government mortgage documents, the qualified witness must ensure they have ‘taken reasonable steps to ensure that the individual is the person entitled to sign the instrument’ as prescribed under Section 87A of the Transfer of Land Act 1958 (Vic), Section 56C of the NSW Real Property Act, Part 2-2005 of the Land Title Practice Manual (Queensland) or any other equivalent legislation.

In light of the above requirement, the qualified witness will undertake a ‘verification of identity’ on you.

Typically, this includes:

  1. A face-to-face in-person interview;

  2. You must bear a “reasonable likeness” to the person depicted in photographs in the identification documents; and

  3. The identification documents must be originals and be produced by you.

Lawyers will also ensure there are no discrepancies in your identity documents.

For example, your passport name is ‘Thomas’, but your driver licence only shows ‘Tom’. In this case, you would need to sign a statutory declaration noting your name difference. A statutory declaration must be correctly signed and witnessed by an Australian lawyer.

Tips for witnessing a mortgage application from overseas

Remember to bring two (2) forms of identity documents that bear your photograph.

​For example, if you reside in Hong Kong, this usually includes your passport and your Hong Kong Identity Card (or your current Australian driver license).

​If you have previously changed your name, please also bring your proof of a change of name.

Where to find a qualified witnessing officer?

The first port of call is to see if you have any friends that fit the bill. Their signature in exchange for a nice lunch on you? This will likely be the best value.

​Failing that, seek out your local Australian Embassy to engage their Notarial service for a cost. Check your relevant Australian embassy website for a listing of their fees.

​For the Hong Kong Australian Embassy, the fee as of 1st July 2020 is HK$389 (exchange rate of AUD/HKD 5.328) for certifying a copy of a document or witnessing a signature.

​Keep in mind that for a single property mortgage transaction, there are usually:

  • Two (2) sets of signatures that need to be witnessed
  • One (1) certification form that needs to be completed by the witness
  • Two (2) copies of identification certified by the witness
  • For a total of five services x HK$389 = HK$1945 per person

The downside of using a Consular officer (besides the costs) is the potentially long booking times, up to 2 weeks during peak season.

​Lastly, you have Notary Publics or Australian Lawyers, these guys offer quick turnaround, flexibility, and convenience but at a steep price. It’s standard practice to see fees charged 2-5x that of the consular officer.

​Luckily, if you are residing in Hong Kong, Odin Mortgage has partnered with Lee & Poon Associates – Australian Lawyers to offer competitive notarial services at rates below that of the Australian Embassy. Just contact them directly and tell them we sent you!

Summary

The property you buy is probably one of your most valuable assets, so be sure to take the time at settlement to ensure that all legal documents related to your mortgage are accurate, most importantly the witnessing requirement.

​When signing your mortgage documents, be sure to pay attention to answering all the required questions and especially signature fields. Where possible, sign the documents with your mortgage broker or banker to ensure correctness.

​If you still have questions about your mortgage, be sure to speak with a mortgage expert today.

Allow us to find you the perfect home loan.​

Apply online to get expert recommendations with real interest rates and repayments.

Should You Pay Off Your Mortgage Early Or Invest? Here’s The Math On What’s Best

Should You Pay Off Your Mortgage Early Or Invest? Here's The Math On What's Best

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Paying off your mortgage quick can help save you thousands of dollars in interest. But before you start chucking money in that direction, you’ll need to consider a few things before deciding whether it’s a smart idea.

We’ll crunch some numbers and discuss whether it makes sense to use your extra cash to pay off your mortgage early or to invest instead.

How To Pay Off Your Mortgage (in 10 Years or less)

Is this realistic, and is it possible given the standard mortgage term is 30 years?

Sure it is.

First, let’s come up with your typical Australian family: two adults and a kid.

You have a $500,000 mortgage on your home with an interest rate of 3% on a 30-year loan term.

  • You earn $100,000

  • Your spouse earns $60,000

  • Together you pay a combined tax of $36,784 and are left with $123,216 in disposable income, which is $10,268 per month.

Based on your level of income, we can expect total family expenses to be around $5000 per month, not including the mortgage repayments. (We got our numbers from the Australian Bureau of Statistics on Household income and expenditure.)

From our mortgage calculator, you’ll be able to work out the monthly repayment to be $2,108.

Now let’s crunch the numbers.

Cash flow $
Net income after tax $10,268
Less: Monthly living expenses ($5,000)
Less: Mortgage repayment ($2,108)
Money leftover for 'extra' repayments $3,160
Transfer the entire $3,160 into your mortgage Redraw or Offset account every month (as Extra repayments), and you’re on your way to paying off your mortgage in 9 years 1 month, saving over $180,000 interest in the process!
monthly extra repayments

There’s nothing crazy about this.

You could pay off your mortgage even quicker by sticking to a budget plan. Reducing your monthly expenses from $5000 to $4000 and increasing your extra repayments by an additional $1000 will help pay off the loan in 7 and a half years.

Paying off your mortgage is something we recommend especially if it’s your primary place of residence because you receive no tax deductions from the interest you pay on your owner-occupier mortgage.

Why you shouldn’t pay off your Mortgage

Pay off your loan quickly! Don’t pay off your loan! Which is it?

While it’s advisable to be paying off your Owner occupied home loan as fast as possible, the case isn’t quite as clear cut for Investment property loans.

With investment assets, the Australian Tax Office (ATO) will allow you to claim all related expenses as a tax deduction, this includes investment properties, and it’s mortgage interest expense.

So if you paid $15,000 in investment interest this year, you’ll be able to claim the full amount against any taxable income you may have such as your Rental income, Capital gains or your salary if working in Australia.

Right, so how does all this look like with real numbers?

Using the example above, $500,000 mortgage at 3% interest rate and rental income of $500/week.

annual cash flow summary
You would be making a rental income of $25,480 p.a. and some may think that income tax would be payable. However, the ATO allows you to claim all related expenses as a tax deduction, thereby reducing your taxable income to $1,951 (before tax depreciation).
annual tax position salary

After accounting for all the tax incentives (depreciation and write-offs), you end up in a negatively geared position, i.e. you pay no tax and instead, start accumulating ‘tax credits’.

Want your personalized cash flow and tax position analysis? We created the ultimate investment property analysis tool, go check it out.

The last point as to why you shouldn’t rush to pay off your investment mortgage is so you’ll have more cash in the piggy and the flexibility that comes with it.

If your investment interest rate is 3.5% and your Australian marginal income tax rate is at 32.5%, then we can calculate your effective rate of savings from you paying down your investment home loan.

By putting $10,000 into your investment mortgage, you may think you are saving 3.5% per year or $350 in interest, but on paper, you are only saving ((1 – 0.325) * 3.5%) = 2.36%, after you account for the loss of tax deduction.

So it’s a question of opportunity cost/trade-off.

If you believe you can make more than 2.36% (after-tax) with your money elsewhere, then you should reconsider paying down your investment mortgage.

One popular strategy is to still opt for Principal and Interest repayments (because P&I rates are about 0.20% lower than I/O rates) while using your Offset account as a place to hold your cash until a better investment opportunity arises.

An important note to make is that paying down the loan (investment or otherwise) carries almost no risk. Whereas if you intend to buy stocks with the expectation of 10-20% return, there’s most certainly risk involved. It’s a good idea to speak to your financial planner to discuss if it’s sensible before making any big decisions.

Summary

Paying off your mortgage early can save you a great deal of money in the long run for relatively little risk. Even a small monthly contribution can allow you to own your property sooner.

However, it may not always be the best option if the mortgage relates to an Investment purpose, and further thought is required.

Regardless, it’s prudent to have an emergency fund before you put your money toward your home loan. Also, pay down your high-interest debts first (e.g. credit cards, personal loans) before you focus on your mortgage.

Making extra payments, refinancing, or switching your repayment schedule are all strategies that you can use to pay off your mortgage early if that is your goal.

Get approved to refinance.

Apply online to get expert recommendations with real interest rates and repayments.

COVID-19 Resources Guide

COVID-19 Resources Guide

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COVID-19 continues to transform our daily lives and routines. We will keep you informed so you can make the best decisions about your mortgage and finances.

Mortgage Assistance Plans

Whether you’re currently having difficulty making your mortgage payment or simply trying to plan ahead, your lender likely has a Mortgage Assistance Plan in place. Since March 2020, Australian lenders have provided deferred payments to over 800,000 Australians.

How COVID-19 Mortgage Assistance Works

​If you’re unable to make your repayments due to COVID-19, you can enroll in a ‘repayment deferral’ program to pause your mortgage repayments for up to 6 months.

Note: While your repayments are on pause, the interest expense will continue to accrue.

So if you aren’t in financial distress, it’s best to continue paying your mortgage payments for as long as you can. This will help you pause your payments later when you need it most.

Paying what you can now benefit you later by decreasing the amount due (and therefore total interest) at the end of your loan term.

If you have a variable rate loan, you can usually make full or partial payments at any time. Just log onto your online banking and make a transfer.

At the end of your six-month deferral, you will be eligible for an extension of up to an additional four months. A deferral extension of up to four months will not be automatic. It will be provided only to those who genuinely need some extra time.

During this time, you will be expected to work with your bank to find the best solution to restructure or vary your loan. Options may include:

  • Extending the length of the loan
  • Converting to interest-only payments for time
  • Consolidating debt
  • Reducing interest rates
  • A combination of the above and other measures.

If during or at the end of any deferral, you continue to be severely financially impacted and are unable to make repayments, you will be assisted through your bank’s hardship process to determine the best long-term solution for your circumstances.

​In regards to credit reporting, if you recommence repayments on your existing loan or enter into a new repayment plan, your credit report will not be impacted, provided you meet the new repayment plan. If your bank grants you an extended deferral period your credit report will not be affected either.

Also during any period of payment deferral, you will be unable to apply for any further lending whether that be refinancing an existing mortgage, cash-out equity, or a new home loan.

To get help now, you can apply for assistance online through your lender’s dedicated COVID-19 support hub.

I have a property purchase or refinance in progress. Will Odin Mortgage still be able to settle my loan?

​Yes! Even though stay-at-home orders are in effect across many parts of the world, our mortgage process is mostly digital to deliver the mortgage experience you deserve while keeping you safe.

What if a valuer is supposed to come to inspect my property?

In many cases, the banks are now able to offer alternatives to in-person valuations. Such as property inspection waivers, off-site valuations, automated desktop valuations, and drive-by valuations. This replaces the in-person valuation requirements on many loans should that area be under lockdown.

Early release of superannuation

Separate to mortgage assistance, under the Australian Government’s COVID-19 financial assistance plan, you will be able to access up to $10,000 of your super tax-free.

Since March 2020, more than 2.5 million Australians have applied for the first batch of early release payments which was available up until 30th June 2020 and has since closed.

From 1st July until 24th September 2020 those in financial hardship will have another opportunity to access up to another $10,000 tax-free.

How COVID-19 Early Release of Super Works

​To be eligible, you must have seen your income drop by at least 20 percent or are now unemployed.

How long does the early release of Super take?

how long does the early release

Before you act, be wary that you may be much poorer for it at retirement age if you decide to tap into your retirement savings now. (assuming you’re not taking that money to re-invest elsewhere.)

Since March 2015, the average 5-year annualized rate of return of industry super funds ranged between 4-9% p.a. approximately. See the chart below.

A 30-year-old accessing the full $20,000 early super, could forgo anywhere from 4-20x ($80,000 – $400,000) the price in lost super at retirement. And sadly, most people who helped themselves of the initial $10,000 batch were under the age of 40.

Note: Market volatility may have already significantly hurt your super balance this year.

The 5-year average annualised rate of Australian Super return
quarter ended
APRA March 2020 Quarterly Superannuation performance statistics
However, if you desperately need a cash injection to help you over these tough times, consider refinancing your mortgage first before risking your financial future by raiding super early.

Where can I get more information on COVID-19 in Australia?

To get further information about the COVID-19 situation in Australia, please visit,

Starting A New Loan

Things are shifting rapidly, but one thing that will never change is our commitment to giving you the best mortgage experience.

Even in countries where stay-at-home orders have taken effect, we can guide you from application to settlement while keeping you and your family safe.

Under the Guiding Principles of the Banking Code of Practice, the Australian lenders, together with the Australian regulators (APRA & ASIC) will continue to provide support to those affected by COVID-19.

As the situation changes, we’ll update this article with the latest information.

Allow us to find you the perfect home loan.​

Apply online to get expert recommendations with real interest rates and repayments.

Australia Mortgage Calculator (with Extra Repayment)

Australia Mortgage Calculator (with Extra Repayment)

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Our Australian mortgage calculator can help you estimate your monthly mortgage repayment.

You can also key in extra monthly repayments or lump-sum payments to see how much faster you can pay off your home loan. Whether or not that’s a good idea, we’ll discuss further, and you can decide.

Enter some basic information to get started.

Like this estimate?

Apply online and get actual numbers by our expert advisers.

Using A Mortgage Calculator

What’s the purpose of a mortgage calculator?

Our Australia mortgage calculator can help you estimate your weekly, fortnightly, or monthly mortgage repayments. This calculator estimates how much you’ll pay on either principal and interest, or interest only. You can also opt to include extra repayments or lump sum payments.

How do I use the mortgage calculator?

Start by providing your property price, loan amount, loan term, interest rate, repayment frequency, and repayment type.

If you want the repayment estimate to include extra repayments or lump sum payments, you can input that information as an option. The mortgage calculator will automatically update once you click or tap away, and voila! See what your monthly repayments will look like based on the numbers you provided.

Adding different numbers to the mortgage calculator will show you how your monthly payment changes. Feel free to try out different loan terms, interest rates, extra repayments and so on to see your options.

Understanding Mortgages 101

What is a mortgage?

 

A mortgage is a loan from a financial institution (usually a bank) that helps you purchase a property.

When you get a mortgage, the bank pays for the cost of your property upfront. In exchange, you agree to repay the lender with interest, over a set period.

What is the loan term?

 

The loan term is the length of time you have to pay off the loan. The most standard loan term is the 30-year term. In Australia, the lenders will offer 30 years as standard regardless of age. 70 years old? Not a problem! So long you’re still working and can service the loan. 

 

Should I choose a short or long loan term? 

 

It depends on your budget and goals. A shorter-term will allow you to pay off the mortgage faster, pay less interest, and build equity quicker, but you’ll have a higher monthly payment. A longer-term will have a lower monthly payment because you’ll pay off the loan over a more extended period, but you’ll end up paying more in interest.

Most people start with a 30-year loan term for cash flow flexibility and adjust as required.

What’s an interest rate?

 

Interest rate is the fee you pay to your lender to borrow the money. The interest you pay is calculated on a percentage of the remaining loan amount. This percentage is the interest rate.

What determines my interest rate?

 

Several factors determine your interest rate, including your loan type (investment or owner occupier), loan amount, loan-to-value-ratio, repayment type, and citizenship. Interest rates are also determined by the Reserve Bank of Australia and to a lesser extent market competition.

What’s included in my mortgage repayment?

 

The typical monthly mortgage repayment is made up of two parts, principal, and interest, commonly known as Principal and Interest or P&I for short.

The mortgage repayment estimate you’ll get from this calculator gives you the option between P&I or Interest Only.

What is ‘principal’?

 

This is the amount you borrow from the bank to buy your property. It’s factored into your monthly repayment and paid off throughout the life of your loan.

What is Interest Only repayment?

 

This is when you only pay the ‘Interest’ part of your mortgage repayment. You won’t be paying any of the principal, and as a result, your home loan balance will stay the same. 

Interest Only loans or I/O for short are also slightly more expensive than Principal and Interest loans by about 0.20%. This is to incentivise you to pay down your mortgage.

What’s Repayment frequency?

 

When you get a mortgage, you’ll have the option to choose how often you’d like to pay the lender—Weekly, fortnightly, or monthly.

The standard is Monthly; however, most people will usually pick a frequency that matches their salary. If you are paid fortnightly then choosing fortnight repayment can be convenient.

Do you pay less interest if you pay Weekly or Fortnightly?

 

In short, yes, you do. Sometimes.

There are two reasons for this. The first reason is minor, the second is more impactful but depends on the lender.

  1. Interest is calculated daily on your loan balance, and by paying weekly or fortnightly, you are consistently paying earlier than if you made monthly payments. You can use our mortgage calculator to see the difference by switching between the repayment frequency. 

  2. Depending on how your lender calculates fortnightly payments you may end up paying one extra month of repayments each year, and because you’re paying more off your loan, you’ll end up paying less interest.

Here is an example, assuming a $2,000 monthly repayment.

Lender 1 calculates fortnightly repayments by halving monthly repayments.

Lender 2 calculates fortnightly repayments by dividing your annual mortgage repayment by 26. E.g. 24000 / 26 = 923

Monthly Fortnightly Weekly
Lender 1 2,000 1,000 5000
Lender 2 2,000 923.08 461.54
In a year there are 12 months, or 26 fortnights or 52 weeks.

Now let’s calculate the total annual repayment between the two lenders.
Monthly Fortnightly Weekly
Lender 1 2,000x12 1,000x26 5000x52
Total 24,000 26,000 26,000
Lender 1 2,000x12 923.08x26 461.54x52
Total 24,000 24,000 24,000

As you can see, with Lender 1, you are paying an extra $2000 each year which is equivalent to one month’s repayment.

Nowadays, most lenders calculate fortnightly payments like Lender 2 as it’s a more accurate method.

If your priority is to reduce the amount of interest you need to pay, then consider utilizing an offset transaction account. All else being equal, proper usage of an offset account will achieve the same, if not better interest-saving outcome than choosing a weekly or fortnightly repayment schedule.

Allow us to find you the perfect home loan.​

Apply online to get expert recommendations with real interest rates and repayments.

Related Resources

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Stamp Duty Australia: The Definitive Guide

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Estimate the stamp duty cost of your property purchase, or learn about foreign stamp duty surcharge and whether that applies to you.

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Ultimate Investment Property Calculator

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Get a detailed analysis of your purchase. Calculate your costs, cash flow, tax position, CGT, ROI. Designed with non-residents in mind.
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How to 2-4x Your Borrowing Power

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Get an idea of how much you can borrow. Learn how you can increase your borrowing power and how the banks assess your income.

How Much Can You Borrow? (And how to 2-4x your borrowing power)

How Much Can You Borrow? (And how to 2-4x your borrowing power)

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“How much can I borrow?”

That’s usually one of the first questions you’ll ask when starting your property buying journey.

The problem is that every borrowing power calculator you try gives you wildly different answers.

Heck, even if you go directly to a bank or broker, you’ll get different answers, and the amounts can vary by as much as 200-300% especially if you’re earning in a foreign currency.

Often you’ll be left dumbfounded at how little you can borrow even though you’ve never been in better shape financially.

We’ll go into the details of this process to help you determine how much you can borrow, how to increase your borrowing power substantially, and what this means for you as you search for your dream property in Australia.

But first, why not give our mortgage calculator a go and see how much you can borrow for yourself.

Try our ‘How Much Can I Borrow’ Mortgage Calculator

Find out how much you can borrow.

Apply online and get expert feedback on your maximum property purchase price with real numbers.

The Central Formula of Borrowing Power

The main principle behind working out your borrowing power is Net Surplus Income (NSI).

 

There are other key metrics used as well, such as Debt Servicing Ratio and Debt to Income ratio, but all you need to know is your NSI.

 

NSI is:

  • Adding your total net income, e.g. Salary, rental income – less any income tax
  • Minus your current ongoing liabilities (credit cards, loans, HECS, etc.)
  • Minus your living expenses (rent, transport, food, holidays, etc.)

 

Whatever you have leftover is the surplus income that can be used towards your new mortgage repayments.

 

Let’s do a quick scenario.

 

For example, let’s say your Gross income is AUD10,000 per month. After tax, your net income is about $7,150 per month.

 

You have no credit cards or loan commitments, and your living expense is $2550 per month.

 

So you have about $4600 spare cash remaining each month that can be used towards new loan repayments which roughly equates to an $850,000 loan.

 

You can use our Mortgage Repayment Calculator to find out how much it costs per month for different loan amounts.

The Bank Factor - Here comes the pain

The bank is always going to assess your income much harsher than what you believe your monthly surplus income is.

 

Think of the person who is the least fun at parties – that is the bank.

 

Here are 7 of the most common and impactful bank factors that can have a profound effect on your borrowing capacity:

 

You Bank
Credit Cards / Overdrafts I have a $20,000 limit credit card but don’t use it so my credit card expense should be ZERO. If I did use it I always pay back in full. We assume the worst. You’ll max out the card and not pay it back therefore we’ll be applying a 46% interest rate p.a. On the maximum limit of the card(s) regardless of whether it’s used.
Result $0 credit card expense $9,200 yearly interest expense
New & Existing Loans I have a $500,000 mortgage with 3% interest rate on a 30 year term. With the first 5 years paying Interest Only. We calculate your repayments from when the P&I term begins, and at our Buffered assessment rate of your rate +2.5% to 3% i.e. 5.5% - 6% on a 25 year term
Result $15,000 yearly repayment $36,845 yearly repayment
Rental expense The rent is $600/week. I split the rent with another person. Both of us are on the lease agreement. We assume the worst. The other person won’t pay and since you’re on the lease agreement you’ll be liable for the full amount.
Result $15,600 ($300 * 52) $31,200 yearly rent expense
Living rent-free I’m staying with family or friends. I don’t have to pay any rent. We’ll still assume a nominal boarding fee of $150/week.
Result $0 $7,800 yearly boarding fee
Living rent-free I spend about $2500 per month on living expenses. We can see from your bank statements regular outgoings totalling $4000 per month. We also include the transactions made on credit cards as well.
Result $30,000 yearly living expense $48,000 yearly living expense
Rental income I receive rental income of $500/week from my investment property. I own this property jointly with my spouse who is not going to be on this new mortgage application. We will assume 20% of that goes to property manager, maintenance and other associated costs. As your spouse owns half the property, you are only entitled to 50% of the rent.
Result $26,000 in gross yearly income $10,400 in gross yearly rent income.
Salary income I earned HKD2,000,000 gross income this year. Paid 15% tax on income so had a net income of HKD1,700,000 This one has a myriad of answers unlike the other factors listed above. Each bank will assess income differently but most commonly they will discount foreign currency income by 20% and then factor Australian income tax rates.
Result HKD1,700,000 net salary HKD982,500 net income

Note: These are the rules rather than the exception.

 

It’s not uncommon to see someone who’s earning well over AUD500,000 end up with a borrowing capacity of less than $200,000, especially Aussies on ex-pat packages with large housing allowances and bonuses.

 

However, all issues can be resolved with some foresight and planning.

 

Now that you know how the lenders truly evaluate your borrowing capacity, it’s time to use this knowledge to your advantage.

 

How to increase your borrowing power 2-4x

If you’ve read the above sections, you’ll now have more technical knowledge on how borrowing power is assessed than 95% of home buyers.

 

Below we go over 3 of the easiest ways to increase your borrowing power that anyone can do.

 

1. Credit cards

 

Even if you don’t use them, they will have a significant negative impact on your borrowing capacity.

 

Check which ones you want to keep and cancel the rest.

 

With the ones, you’re keeping, reduce the credit limit, the lower, the better.

 

For example, if you have a $50,000 limit credit card but only ever spend up to $10,000 on any given month. Reduce the limit to $15,000 or less.

 

2. Living expenses

 

The banks in Australia all use what is known as Household Expenditure Measure (HEM) as a benchmark to estimate your living expenses.

 

When calculating how much you can borrow, the bank will use the higher of your stated monthly living expense or HEM.

 

Your living expense HEM living expense Bank will use
$2,500 $3,000 $3,000
$3,500 $3,000 $3,500

If your current living expense is higher than the HEM, then you can consider creating a budget plan to reduce your monthly living expense.

 

HEM is a figure that’s based on your household income, location, and size of your family.

 

3. Choosing the right lender

 

This is especially true if you are an Australian ex-pat or foreign national who is earning foreign currency as a non-tax resident of Australia.

 

Australia has over 50 lenders of mortgage products, and each lender will calculate your income differently.

 

The vast majority of lenders won’t consider the foreign income at all and the ones that do will typically discount your income by 20% (and as much as 40%). Further discounting can then apply to your non-base salary such as housing allowance, bonus, etc.

 

With the remaining income, most lenders will usually tax your income at the Australian tax rates. If you are residing in Hong Kong, Singapore, UAE, or other low tax jurisdictions, then this will seem unjust.

 

To top this off, lending policies are regularly changing, and where bank A had the most favorable policies for ex-pats, in a year’s time bank A may no longer be lending, and bank B is now the better bank.

 

Take the guesswork out of choosing the right lender.

Get a free assessment from Odin Mortgage.
Lastly, the most obvious way to borrow more is to earn more money! But this isn’t usually something that can be enacted in the short-term, so we’ll be leaving this out for now.

Alright! Let’s do a scenario on your borrowing power to see how we can QUADRUPLE it.

Scenario 1: Base

 

You proceed with the standard bank which discounts foreign base income by 20%, and a further 20% on bonus, allowances. Bank then applies Australian income tax rates to calculate your net income.

 

This is your financial position vs what the bank will use to determine borrowing capacity:

Your details Typical Bank use
Base salary HK$100,000 per month HK$80,000
Allowance HK$30,000 per month housing allowance which pays for rent HK$19,200
Bonus HK$150,000 HK$96,000
Credit cards AU$50,000 limit AU$50,000
Living expense AU$3,500 per month AU$3,500 per month
Existing mortgage AU$500,000 on 3% Interest Only repayment for 5 years on 30 year term AU$500,000 on 5.5% P&I over 25 years
Income tax rate 14.5% 40.2%
RESULT Your maximum borrowing capacity is approximately AU$450,000

Scenario 2: Enhanced

 

You proceed with an expat-friendly bank which allows 100% of foreign base income. However, they still discount 20% on bonus, allowances. Also applies Australian income tax rates.

 

You reduce your credit card limit to $15,000 and switch your existing home loan to P&I repayments instead of Interest Only.

 

You also reduce your monthly living expenses to $2,500

 

This is your financial position vs what the bank will use to determine borrowing capacity:

 

Your details Typical Bank use
Base salary HK$100,000 per month HK$100,000
Allowance HK$30,000 per month housing allowance which pays for rent HK$24,000
Bonus HK$150,000 HK$120,000
Credit cards AU$150,000 limit AU$15,000
Living expense AU$2,500 per month AU$3,000 per month (because bank uses a minimum benchmark)
Existing mortgage AU$500,000 on 3% P&I repayment 30 year term AU$500,000 on 5.5% P&I over 30 years
Income tax rate 14.5% 15%
RESULT Your maximum borrowing capacity is approximately AU$1,800,000

The two examples above demonstrate how you could potentially increase your borrowing capacity 4x with some carefully considered adjustments.

 

To massively increase your borrowing capacity. Start by getting expert advice, then select the best lender specific to your circumstance, understand that bank’s credit policies, and finally prepare your application in a way that maximizes its strengths.

 

Summary: Deciding how much you can borrow vs how much you should borrow

Ultimately, how much you can borrow depends on your financial situation and choosing the right lender. How much you should borrow, on the other hand, is a different story.

 

We’ve given you a primer on how to substantially increase your borrowing power which does come with its risks as you’ll now be able to borrow a lot more than anticipated for your dream property.

 

But deciding how much you should borrow requires a more comprehensive decision than just how much money you want to spend on mortgage payments each month.

 

Assess your full financial situation, your ability to pay off a mortgage, and where you need to save for other things such as emergencies.

 

Once you’ve done all that, go after that perfect home. Odin Mortgage is here to help you every step of the way.

 

Get approved to buy a home.

Odin Mortgage helps you get there faster and easier

Related Resources

Ultimate Investment Property Calculator

6-minute read
Get a detailed analysis of your purchase. Calculate your costs, cash flow, tax position, CGT, ROI. Designed with non-residents in mind.

Australian Mortage Calculator & Guide

5-minute read
Estimate the cost of your monthly home loan repayments. Switch between repayment types, frequency, and optional extra repayments.

Stamp Duty Australia: The Definitive Guide

7-minute read
Estimate the stamp duty cost of your property purchase, or learn about foreign stamp duty surcharge and whether that applies to you.

Investment property calculator

The Ultimate Investment Property Calculator for Australian Expats & Foreign Investors (Includes Email Analysis)

6-MINUTE READ

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Our all-in-one investment property calculator can help you estimate:

  1. The deposit required for your purchase
  2. The cash flow,
  3. Tax position (Negative, neutral, or positive gearing)
  4. Capital gains tax payable when selling the property, and
  5. Your Return on Investment

Take the time to understand what the results mean, and you will be well ahead of the typical property investor.

You can also get a detailed summary of the analysis sent right into your email inbox when you’re done.

This is a slightly more advanced calculator, so if it starts to seem confusing, scroll down to the bottom where you will find our walkthrough case study example.

Note: The calculator is already pre-filled with an example which we will refer to in our case study below.

When you are ready to start your personalised analysis, just input your data in the fields and be on your way to becoming a more savvy property investor.

Try our Investment Property Calculator:

A property purchase is a big deal, but applying for finance doesn't have to be.

Apply online in minutes to get your expert assessment.

1. Australian Property Cost Summary

The first part of the investment analysis is to understand how much funds you would need (i.e. your initial investment) to acquire the property. 

In the example above, the total cost to acquire the property was $990,514, inclusive of stamp duty, legal, and bank borrowing fees.

You obtained a $760,000 mortgage which was 80% of the purchase price.

Therefore your initial investment (contribution) is $230,514.

This calculation is also useful to perform if you want to know the total acquisition cost of a property transaction or how much cash you need for a deposit.

2. Annual Cash Flow Summary

Your property’s cash flow position equation is:

Rental income – Expenses = Net cash flow position

The cash flow summary is essential to know because it tells you whether this property is going to generate additional income or cost you money to hold.

In the example above, your annual rental income = $35,490 (Rental yield: 3.74% p.a.)

With expenses of:

  • Mortgage interest: $24,168

  • Council/water rates: $3,000

  • Maintenance/strata: $3,500 (If you buy a house, it’s maintenance. If an apartment, it’s strata/body corporate fee)

  • Tax return fee: $400 (Accountant’s service fee)

  • Insurance premium: $500 (Building & contents, landlord’s insurance fees)

  • Property management fee: $2,342 (based on 6.6% inc. GST of rental income)

  • Land tax: $0 (You might have land tax if your land value exceeds the States threshold.)

Total property expenses = $33,910.

Therefore your net cash flow balance is $1,580—a positive number.

If you got a negative number that means expenses were higher than income, and you will likely need to supplement with some of your cash to keep your investment property running.

It’s important to understand that a negative cash flow property does not equal a bad investment.

So long as your property’s value increases at a reasonable rate of growth, cash flow takes a backseat on return on investment. We will explore this in more detail shortly.

Note: The above assessment assumes Interest Only repayment. If you are paying P&I on your mortgage, then your net cash flow position will be lower. Using the example, it would be -$13,592.92. 

It’s a lower figure, as you will need to pay down your loan (principal) on top of the interest.

The great news is that all the expenses above are 100% tax-deductible.

Note: Only the Interest portion of your mortgage repayment is tax-deductible. The principal portion of your repayment is NOT tax-deductible.

3. Annual Tax Position Summary

Tax analysis estimates how much or how little income tax you will need to pay on the property.

You can also determine whether your investment is negatively or positively geared.

You can work this out by taking your Net Cash Flow position (which was already calculated) and applying any applicable tax incentives/write-offs.

The tax incentives are:

Building depreciation (written off at 2.5% p.a.)

  • These are the structural elements of your property that are fixed to the building. Also commonly referred to as capital works deductions.

  • Examples of assets that will qualify include walls, roof, tiles, built-in robes, cabinets, fixed bathroom fittings and vanities.

Plant/equipment depreciation (written off over the effective life of the asset. Average 7 years)

  • These are the plant and equipment assets contained within the property. These are assets deemed to be mechanical or easily removed from the property as opposed to those that are permanently fixed to the structure of the building.

  • Examples include carpet, blinds, ovens as well as less obvious items such as door closers.

Bank borrowing fees (written off over 5 years)

Your net cash flow position: $1,580

Less: Total tax incentives: $15,063

Your taxable income = -$13,483 (negatively geared)

Income tax payable = $0 (calculated at 32.5% non-resident tax rate)

If your taxable income is negative (i.e. taxable loss), that means your property is negatively geared and therefore, no income tax – and vice versa.

Any taxable losses you incur can roll over to the next year indefinitely, accumulating as ‘tax credits’.

You can use these tax credits to offset any future taxable income (usually when you sell the property and make capital gains, or if you work in Australia again and have taxable income).

So with the example above, after five years, you would have built up $67,415 in tax credits.

4. Capital Gains Tax Assessment

This section is about working out how much Capital Gains Tax (CGT) you need to pay when you sell your property.

Capital gains tax falls under your income tax despite being referred to as CGT.

Assuming you sold your property after it grew in value by 6.5% p.a. over five years, the sales price would be $1,301,582. (Your capital gains)

Less:

  • Cost to acquire the property (Purchase price + Legal fees + Stamp duty) = $989,869.

  • Tax credits you accumulated over the period of ownership = $67,415

Add back:

  • Building, plant/equipment depreciation claimed over the years +$74,670

Once you apply the necessary deductions and add-backs, your taxable capital gain is $318,968

As non-tax residents of Australia, your income will be taxed from the first dollar and at a higher rate. See table below on Foreign resident tax rates 2019–20

Taxable income Tax on this income
$0 - $120,000 32.5c for each $1
$120,001 – $180,000 $39,000 plus 37c for each $1 over $90,000
$180,001 and over $61,200 plus 45c for each $1 over $180,000
 
 

With two owners on the title of this property, your total CGT payable will be $107,218 calculated on the non-resident tax scale.

5. Return on Investment Analysis

With property, you can make a profit in two ways:

1. From rental income. (net cash flow)

2. From the sale of the property. (capital gains)

1. Rental income 

As indicated in the cash flow assessment analysis, you had a positive cash flow of $1,580 p.a.

So over the five years of ownership of this property, your total cash position totalled $7,900.

From the tax position analysis, we determined that you didn’t have to pay any tax on this income so you get to keep all of that and we will count this $7,900 as part of your overall profits.

If this figure were negative, however, we would count that as a reduction in your overall profits.

2. Sale of property

You sold your property for $1,301,582 after five years of capital growth.

You would then have to pay CGT of $107,218 and discharge the mortgage of $760,000, leaving you with an after-tax sales profit of $434,364 which you get to take home.

Calculate your Return On Investment

Add the two profit figures together ($7,900 + $434,364) for a total net profit of $442,264.

Your ROI is calculated by dividing the net profit above by your initial investment.

Your initial investment, in this case, was $230,514 as determined in the very first calculation – Property Cost analysis.

Your ROI = 91.89% ($442,264 / $230,514)

Get On Your Way To Owning An Investment Property

Are you ready for the next step toward owning an investment property? If so, it’s time to get your mortgage preapproval and start researching properties in your desired area. 

Ensure your financial stability is sound (we can help with that) and take your time to consider the housing market, taxes and whether you’d want to hire a property management company.

Work with an expert mortgage adviser to help you on your journey to buy your first or fifth investment property. Odin Mortgage can help you navigate deposit requirements, preapprovals and more.

Get your investment property pre-approval today

Try our 1-minute online application

Related Resources

Australian Mortgage Calculator & Guide

5-minute read
Estimate the cost of your monthly home loan repayments. Switch between repayment types, frequency, and optional extra repayments.

How to 2-4x Your Borrowing Power

6-minute read
Get an idea of how much you can borrow. Learn how you can increase your borrowing power and how the banks assess your income.

Stamp Duty Australia: The Definitive Guide

7-minute read
Estimate the stamp duty cost of your property purchase, or learn about foreign stamp duty surcharge and whether that applies to you.

Australian Expat Home Loans

Australian Home Loans: The Ultimate Guide for Aussie Expats in 2021

8-MINUTE READ

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As an Australian citizen living abroad, obtaining a home loan as a non-tax resident of Australia is available but gone are the days where banks would hand out loans to anyone who asked.​

Tightening of credit policies for Australians expats has been gradually increasing over the last four years. The high levels of restriction we see today are the results of the Australian regulators’ actions to control the influx of foreign investments into residential property and minimising money laundering risk.

Read on to see how the lending landscape has changed and what this means for you as an Aussie expat.

The current lending situation.

What’s still possible?
  • You can still get a loan term of 30 years regardless of age. There have been talks to limit this to the retirement age, but for now, your grandma can still get a loan for the full 30 years.
  • Variable-rate and Fixed-rate mortgages are available as standard. With the option to do split rate loans, i.e. a combination of variable and fixed.
  • No interest rate margins/penalty by being overseas. You’ll get the same interest rates as those residing in Australia will – assuming the same bank/product.
  • No early repayment penalties by law. This cost was abolished years ago and replaced with a one-off discharge (admin) fee when you pay off your loan – typically around AUD 300.
  • Interest Only repayment loans are still available. Great for those seeking minimal monthly repayment and maximum cash flow flexibility.
  • Able to cash out / release equity from existing Australian properties you own to borrow more for investment purposes such as buying another property, renovations etc.
What’s not?
  • Australian based banks no longer offer multi-currency loans – only AUD now. With the AUD depreciating since 2011 you were better off borrowing in AUD anyway, now you don’t have of choice, sadly.
  • Australian banks based Overseas. E.g. ANZ Hong Kong, NAB Singapore, CBA UK etc. No longer offer residential mortgage services. You’ll see them around, but they’re only serving corporate institutions now.
  • Relying on policy exceptions to get your loan approved. The lenders have now become very, very policy-driven. I.e. These are all our rules. Do you meet them? Y/N “But I’ve banked with you lot for 20 years!” doesn’t get you very far nowadays I’m afraid.
In truth, the banks are still hungry to lend to Australian expats, but it’s the regulators, namely the Australian Prudential Regulatory Authority that is imposing harsher restrictions on bank lending that is keeping a lid on foreign investment lending, which includes you, as Aussie expats.

Allow us to find you the perfect home loan.

Apply online to get expert recommendations with real interest rates and repayments.

Australian Expat Home Loans FAQs

You are not required to be in Australia to obtain an Australian mortgage.
 
There are, however, parts of the mortgage process which would be easier if you were in Australia—such as verification of your identity, liaising with all parties involved, witnessing your mortgage documents, or trying to get a hold of the bank.
 
With Odin Mortgage, we make getting a home loan overseas easy, providing you with a seamless experience as if you were back in Oz.
Australian Expats can borrow up to 95%, including Lender’s Mortgage Insurance (LMI). If you do not want to pay LMI, the maximum LVR is 80% and is the most popular option.
 
Currently, most banks are lending between 60-80% LVR of the purchase price or valuation (whichever is lower).
This is a simple question with a complex answer. Each individual will be different, and we go into detail with examples on how much you can borrow, how to increase your borrowing power and more in this article ‘How Much Can You Borrow?’.
The better question the lenders will be asking instead is, can the applicant prove his/her income? By way of payslip, formal bank statements, and employment contract?

If yes, then it’s very likely your type of foreign currency will be eligible and accepted.
In short, yes, you can. Being self-employed overseas adds a layer of complexity (and therefore risk) to the lender which they don’t like so most won’t accept this type of employment.

The few that do will have additional requirements. Contact us or start an online application, and we’ll be happy to advise.
When you apply to the banks, early in their assessment phase, a credit check will be performed but only in Australia. The banks in Australia will not be able to do a credit check for the country you reside in.

In some rare cases, (seen more in foreign national applications), the banks may ask to see a credit report in your country of residence. Odin Mortgage will be able to advise ahead of time if this is the case.
A POA may be necessary if you’re staying in a country where there isn’t an Australian Consulate/embassy or if circumstance prevents you from getting certain documents signed and witnessed.

With specific lenders, a POA may be necessary, and we would let you know in advance if that is the case.

Aside from that, the majority of Australian expats do not need a POA, and we will assist you with the signing process.
If the Australian citizen is the one producing the majority of the income, this won’t be an issue. However, if the foreign national is the one working and the Australian is unemployed, your application will be treated as foreigner lending. Your options will be limited, and interest rates will be less competitive.

The lenders will view what type of loan this is by who is contributing the majority of the income towards servicing the mortgage.

There’s also a critical tax consideration for those purchasing with foreign citizens which we will address in the latter part of this article.

For more FAQs such as those relating to buying a home, refinancing, fees and expenses, please visit our FAQs page here

Here's how it works.

We are available 7 days a week. When you are ready, so are we.

How do the banks assess your foreign income?
(spoiler: it’s bad, sort of)

If you were living and working in Australia, the lender would consider 100% of your gross income when calculating your borrowing capacity but as an Australian expat, the lender would only look to take 80% of your gross income. 
It can range from 50-100% depending on the type of currency and the lender. 
 
This immediate reduction is to account for currency risk. The fluctuation of the currency relative to the AUD at any given time during your loan term. The more significant the reduction, the more volatile the lender perceives that type of currency to be. 
 
Currencies like the USD, GBP, SGD are tier 1 currency, secure and stable, and lenders would typically look to consider 80% of the income. Whereas currencies like BRL, TRY would see reductions by as much as 50%.
 
Of course, the foreign currency you earn has a good chance of appreciating (therefore strengthening your position) just as much as it has depreciating, but the lenders will always assess your application from a pessimistic, conservative angle to ensure even in dire situations you will still be able to service the loan. 
 
On top of this currency exchange reduction, Most lenders will also use Australian tax rates when assessing your income rather than that of the country you live in. 
 
There are a million Aussies scattered across a hundred different countries. And the majority of lenders don’t have the capacity or the desire to want to understand how your income is taxed, so they just apply the Australian tax rates which they know is one of the highest in the world. 
 
The thinking behind this is that if you can pass the stress test using Australian tax rates, you’ll pass anywhere else.
 
However, this especially hurts if you are in a low tax rate country such as Singapore, Hong Kong, or United Arab Emirate, which doesn’t have to pay any income tax.
 
Fortunately, some lenders will allow you to use your local country’s tax rates. If residing in low tax rate countries, this will have a significant positive impact on your borrowing power.
 
The table below shows how much of your income a typical vs. lenient lender would consider after deductions/taxes. 
 
Scenario: Gross $240,000 AUD equivalent income
Choosing a lender that is favourable to your income’s currency will make a large difference in how much you can borrow.

Typical LenderLenient Lender
Australian Dollar (AUD)$154,000$154,000
British Pound (GBP)$128,700$154,000
United States Dollar (USD)$128,700$154,000
Chinese Yuan (CNY)$154,000$154,000
Singapore dollar (SGD)$154,000$187,200
United Arab Emirate Dirham (AED)$154,000$240,000

Choosing a lender that is favourable to your income’s currency will make a significant difference in how much you can borrow.

Buying with your foreign spouse may DOUBLE your stamp duty costs.

If you are an Australian citizen purchasing a property with a foreign national in joint names, please be aware that Foreign buyers stamp duty surcharge will apply to half of the property’s value which can come as a shock.
 
For example, an Australian citizen buys a $1,250,000 property in NSW with a foreign spouse, jointly owned 50/50.  
 
This purchase would equate to a standard Stamp duty of $54,052 plus Foreign Buyers Duty of $50,000 for a total of $104,052. It is effectively doubling the stamp duty cost.
 
The alternative is to just purchase in the Australian spouse’s name and only having to pay the standard Stamp Duty of $54,052. There’s no penalty or surcharge levied on Australian citizens residing overseas.
 
If your home loan application doesn’t service without your foreign partner’s income, some lenders will allow the foreign spouse as a co-borrower and not have to be on the property title. 

Click here to calculate your stamp duty or learn more about foreign buyers duty.

Do you need to pay (Australian) tax if you get a home loan as an Aussie expat?

You only need to pay income tax on Australian sourced income.

So if your home loan was because you bought an Investment property and that property is generating rental income then yes, you’ll be required to lodge an Australian tax return every year from that point onwards.

But fret not! The Australian Tax Office (ATO) won’t be coming after your foreign salary income, foreign investments or any offshore investments as a non-tax resident of Australia. (Except if you have a HECS/HELP debt, then you will need to report your foreign income to calculate the repayment of HECS/HELP – your foreign income won’t be taxed)

Other taxes that may be applicable are:

  • Land tax (if the total land value in specific State is above the threshold limit),

  • Victorian Vacancy tax (if property left vacant in VIC), and

  • Capital gains tax (when you sell the property and made profit)

If you aren’t sure about your tax residency status, contact us, and we’ll be happy to help.

P.S. Negative gearing is alive and well for Australian expats. 100% of your Investment Loan Interest rate is tax-deductible, as is building depreciation, property management costs and much, much more.

Use our Investment property calculator and learn more on how to maximise your investment from a tax perspective.

Case Study: Aussie Expat couple Matthew & Kylie Living in Hong Kong (high variable income)

Background: 

Matthew works in Finance in a Senior position. The majority of his income comes in the form of Annual bonus, education allowance for the kids, and housing allowance, which pays for their high rent expense. Kylie is at home managing the kids.

Goal: 

Wants to buy Investment property for $2-3M (to build up tax credits while abroad with an expectation of capital growth) that will one day be their Owner-occupier home when repatriating back to Oz in a few years. Require 70-80% LVR, low rate with an Offset account and flexibility to pay the loan off as desired.

Problem: 

The lenders they approached declined their loan application due to failed servicing (stress test). The lender would not consider Matthew’s substantial bonus income which accounts for 40% of his total income. Furthermore, the lender reduced his housing allowance to 64% and applied Australian tax rates to his income despite the Hong Kong tax rate capped at 15%.
Note: The above is the norm rather than the exception.

Solution:

Odin Mortgage provided Matthew with a personalised assessment and multiple lending options before any submission of documents. His high variable income got included in the evaluation, as well as the use of local Hong Kong tax rates resulting in borrowing capacity exceeding what was required. Structured a flexible split rate loan with an offset account and the ability to switch to Owner-occupier loan if plans to return to Australia came earlier.  

On paper, this may seem like a strong application, but to the majority of banks, this is a declined application. The result of which is 2-4 weeks wasted in the home buying process as you waited idly for the bank to take its time and tell you ‘sorry, no, this one’s not for us’. 

Your Home Loan approval starts with the right advice.

This year is arguably the most volatile period post-the global financial crisis and the lenders in Australia have tightened lending policies more than ever. 

That said, many of the loan scenarios are still applicable today, only that you might not be able to borrow as much as you once did a few years ago, and where you previously had dozens of options, you might now only have a handful. 

Speaking to an expert, finding out which lender suits you best and structuring your application to meet all the policies will be the key to a successful home loan.

Allow us to find you the perfect home loan.

Apply online to get expert recommendations with real interest rates and repayments.