Australian Expat Home Loans

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

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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

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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.

Stamp Duty in Australia: 2021 Definitive Guide

Stamp Duty in Australia: The Definitive 2021 Guide

7-MINUTE READ

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For the majority of home buyers, paying Stamp Duty in Australia is an unavoidable step in property ownership. It is arguably the single most expensive cost you’ll have to pay in acquiring a property, whether that be a house, vacant land or off-the-plan apartment.

So what exactly is Stamp Duty in Australia?

Stamp duty is a tax charged by the Australian states and territory governments on certain documents and transactions –  the main one being property transactions.

The States collect the tax and spends it on infrastructure, public facilities, and healthcare, amongst other things. 

How much is Stamp Duty in Australia for properties?

The Stamp duty cost for most properties typically ranges between 4% to 5% of your property’s value. 

E.g. If your property purchase price is $1,000,000 then Stamp duty cost payable is approximately $40,000 – $50,000.

Stamp duty is calculated based on three core variables: 

  1. The property purchase price, 

  2. Location, e.g. NSW 

  3. Intended purpose, e.g. Primary residence or investment

Each State Government has its way of calculating stamp duty so that figures will vary depending on the variables you enter. 

Try our Australian Stamp Duty Calculator!

  • First Home Buyer means that it’s the first time you bought a home that you will be living in for at least 6 months of the first 12 months of ownership. For an Australian expat, this is usually always ‘No’.
  • Foreign Purchaser means that you are not an Australian citizen or Australian Permanent Resident. If you are an Australian expat, you are not a Foreigner Purchaser.
  • Transfer fee is a state government fee for updating the land’s ownership title records to your name.
  • Mortgage fee is another government fee. For registering your mortgage and the lender as mortgagee on your property.

Note: The stamp duty cost vs. property price relationship is not linear. The higher the property value, the more stamp duty payable percentage-wise.

Allow us to find you the perfect home loan.​

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

When do you have to pay the Stamp Duty?

This will vary from State to State. 

Your appointed conveyancer, solicitor or settlement agent will advise you and assist with the payment of the Stamp duty to the State’s Revenue Office (SRO).

If you are obtaining a mortgage, the Stamp Duty is usually paid on the day of settlement by the solicitors. By using the funds available at settlement, either from the loan proceeds or from your contributions.

Stamp Duty Deadlines:

StateDeadline
NSWStamp Duty to be paid to the SRO within 90 days of settlement. If purchasing off-the-plan, Stamp Duty is payable within 90 days of signed contract date.
VICStamp Duty to be paid to the SRO within 30 days of settlement.
QLDStamp Duty to be paid to the SRO within 30 days of settlement.
WAStamp Duty to be paid to the SRO within 30 days of receiving the Duties Assessment Notice. To receive the Assessment Notice you’ll first have to lodge your Transfer documents to the SRO within 60 days of the settlement.
NTStamp Duty to be paid to the SRO within 60 days of entering into a transaction or settlement, whichever is earlier.
SAStamp Duty to be paid to the SRO on the day of settlement.
TASStamp Duty to be paid to the SRO within 90 days of settlement.
ACTStamp Duty to be paid to the SRO within 14 days of receiving the Notice of Assessment. To receive the Assessment Notice you’ll first have to lodge your Transfer documents to the SRO within 14 days of the settlement.

Foreign Buyer Stamp Duty Surcharge – Do you need to pay it?

In the last few years, the State Governments have imposed additional Stamp Duty of up to 8% for anyone who is a foreign buyer. 

This surcharge gets added on top of the standard Stamp duty. 

There is currently no Foreign Buyers Stamp Duty Surcharge in the Northern Territory and the ACT. In NSW and VIC, it’s 8%, and for the rest of the states, it is 7%. 

Note: You are not a Foreign Buyer if you are an Australian Citizen or an Australian Permanent Resident, even if you reside overseas.
Australian Territory

Stamp duty surcharge is common practice amongst other developed countries to help curb the strong demand for foreign investment into residential properties, control housing affordability, and generate extra tax revenue.

Countries such as Hong Kong, Singapore and Canada have implemented similar measures with comparatively harsher fees as high as 20% additional Stamp Duty on top of the standard fee!

Note: If you are an Australian citizen purchasing a property jointly with your spouse, who is a foreign national, take heed!

Foreign buyers stamp duty will apply to half of the property’s value which can be an unexpected shock.

Two scenarios:

  1. Foreign national buys a $1,250,000 property in NSW this would equate to a standard  Stamp duty of $54,052 plus Foreign Buyers Duty of $100,000 for a total of $154,052.

  2. Australian citizen buys a $1,250,000 property in NSW with a foreign spouse, jointly owned 50/50.  This would equate to a standard Stamp duty of $54,052 plus Foreign Buyers Duty of $50,000 for a total of $104,052.

The alternative is to purchase in the Australian spouse’s name and only having to pay the standard Stamp Duty of $54,052. 

In some cases, you’ll still be able to have your Foreign national spouse on the Home loan application if you need to show more income for borrowing capacity. They won’t appear on the title of the property.

Note: Anyone that is on the mortgage application will be liable for the mortgage repayments even if they are not on the title.
 
In cases of divorce, Family Law Court will ultimately decide who gets what as opposed to who’s on the title of the property.

How to reduce or avoid paying Stamp Duty altogether

In some circumstances, you may be able to get a concession or exemption from paying stamp duty. 

If you are residing overseas, it’s highly unlikely you’ll be eligible for the First Home Owners stamp duty concessions, as you’ll need to be living in the property for at least six months of the first year of ownership.

But fret not.

You can purchase multiple investment properties in Australia while overseas and still be eligible for the First Home Owner benefits once you return to Australia.

Stamp Duty Concessions and Exemptions

COVID-19 recovery plan – (1st August 2020 – 31st July 2021)
First time home owners purchasing primary residence (new homes only):

Purchase price <=$800,000 = Stamp duty exempt
Purchase price $800,001 – 999,999 = Stamp duty concession
Purchase price $1 million+ = No concession

———————————————

First time home owners purchasing primary residence (established):
Purchase price <=$650,000 = Stamp duty exempt
Purchase price $650,001 – 799,999 = Stamp duty concession
Purchase price $800k+ = No concession

First time home owners purchasing vacant land (to later build on):
Purchase price <=$400,000 = Stamp duty exempt
Purchase price $400,001 – 499,999 = Stamp duty concession
Purchase price $500k+ = No concession

First time home owners purchasing primary residence:
Purchase price <=$600,000 = Stamp duty exempt
Purchase price $600,001 – 749,999 = Stamp duty concession
Purchase price $750k+ = No concession

Pensioners, farmers, and those purchasing from a plan are also eligible for Stamp duty concessions or exemption to varying degrees.
First time home owners purchasing primary residence:
Purchase price <=$500,000 = Stamp duty exempt
Purchase price $500,001 – 549,999 = Stamp duty concession
Purchase price $550k+ = No concession

First time home owners purchasing vacant land (to later build on):
Purchase price <=$250,000 = Stamp duty exempt
Purchase price $250,001 – 399,000 = Stamp duty concession
Purchase price $400k+ = No concession

First time home owners purchasing primary residence:
Purchase price <$430,000 = Stamp duty exempt
Purchase price $430,000 – 530,000 = Stamp duty concession
Purchase price >$530,000 = No concession

First time home owners purchasing vacant land (to later build on):
Purchase price <=$300,000 = Stamp duty exempt
Purchase price $300,001 – 399,000 = Stamp duty concession
Purchase price $400k+ = No concession

Currently there is a 75% stamp duty discount for anyone purchasing off-the-plan (pre-construction) until 23rd October 2021
Other types of exemptions apply to family farms transactions between family members.
First time home owners purchasing primary residence can get $18,601 off their stamp duty.
This equates to $430,000 stamp duty exempt.
$430,000 – $650,000 = $18,601 discount
>$650,000 = no concession.

There are also exemptions and discounts for seniors, pensioners, or carers.
There are no Stamp Duty exemptions of concessions. South Australia currently has the highest Stamp Duty of any State.
First home buyers and Pensioners in Tasmania can receive a 50% concession on stamp duty when purchasing a property value up to $400,000 until 30th June 2020.

Stamp duty exemption also applicable for married couples who are transferring primary residence property from sole name into joint names.
The ACT offers the Home Buyer Concession Scheme for home buyers buying new properties, established properties or vacant blocks of land (from 1 July 2019).

There are a number of conditions, including that the applicant/s can not have held an interest in any land in the last two years.
 
They’ll also need to live in the property for at least one year after buying it.

They also need to have an income which is lower than the threshold. For those with no dependent children, this threshold is $160,000 for the year prior to the property transfer, grant or agreement of property transfer – whichever is first. For those with one child, it’s $163,330.

Other stamp duty exempt scenarios:

In cases of divorce where mandated by Court order, Stamp duty will be waived when transferring properties to the other party.

If a family member passed away and in their Will, it’s stated the properties are to be passed down to you, then Stamp Duty will also be waived. 

Note: There is no concession for gifting property from one person to another. Even if a family member sold you one of their properties for $1, the State government would send a third party valuer to obtain the market value of that property, and you will be charged Stamp duty accordingly.
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How to borrow the entire Stamp Duty in your home loan

In most cases, the banks will only lend you up to 80% of your property’s value which means you’ll still need to come up with the remaining 20% deposit yourself, plus the 4% – 5% stamp duty, so total contribution required is approximately 25%.

Using an example of a $1,000,000 property, you’ll need $250,000 for your contribution.

So how can you come up with that $250,000?

Method 1 – 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 effectively borrowing the entire amount of the purchase and the stamp duty.

Method 2 – Family Guarantor home loan

This method doesn’t require you to have any existing properties, but it does rely on your parents having one.  

It’s the same concept as the first method. Your parents offer their property as additional security to the bank and assuming there’s sufficient equity available in their property; the bank will allow you to borrow up to 80% of the value.

Method 3 – Lender’s Mortgage Insurance (LMI)

You can borrow up to 90% 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.

Allow us to find you the perfect home loan.​

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

Final Words

Lack of foresight into the cost of Stamp Duty can derail your property buying journey and in some cases give you a nasty surprise after signing an unconditional purchase contract especially if there’s a foreign citizen involved.

That said, the hefty tax bill is mostly unavoidable. To ease the pain, look at it as your tax-deductible donation to the State government in their efforts to make Australia a more desirable place to live!

State Revenue Office Contact:

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