Expat Home Loans Australia Guide | Expat Mortgage Australia

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If you’re an Australian citizen living overseas looking to obtain a property loan in Australia as a non-tax resident, i.e. an expat mortgage Australia, you need to be aware of the changing lending landscape. Over the last four years, credit policies for Australian expats have tightened due to government regulations aimed at controlling foreign investment and reducing money laundering risks in the residential property market.

This has made it more challenging for expats to secure financing for their dream home. However, with the right guidance and expertise from an experienced expat mortgage lender, it’s possible to navigate the changing policies and obtain a loan that meets your needs.

In this blog post, we’ll explore the changes in the Australia property loan landscape and what they mean for you as an expat. We’ll also provide answers to common questions about obtaining a home loan on a foreign income in Australia and simplify the overseas mortgage process.

The Current Lending Situation for Australian Expat Mortgages

What’s Still Possible for an Expat Mortgage in Australia?

  • Got a loan in mind? Good news – age isn’t an issue! With up to 30 years’ terms available, you don’t have to worry about reaching retirement before paying it all off. So get those investments rolling, no matter how young or old you are!
  • Both variable-rate and fixed-rate mortgages are available, and you can opt for a split rate loan, which is a combination of variable and fixed rates.
  • There are no interest rate margins or penalties for being overseas. You will receive the same interest rates as Australian residents, provided you opt for the same bank and product.
  • By law, there are no early repayment penalties. This cost was abolished years ago and replaced with a one-off discharge fee (usually around AUD 300) when you pay off your loan.
  • Interest Only repayment loans are still available. Great for those seeking minimal monthly repayment and maximum cash flow flexibility.
  • You can release equity from existing Australian properties you own to borrow more for investment purposes, such as buying another property, renovations, etc.

What’s Not Possible for Expat Home Loans Australia?

  • Australian banks no longer offer loans in multiple currencies. While the Australian dollar has declined in value since 2011, borrowers now have no choice but to take out loans in AUD.
  • Banks based in Australia that operate overseas, such as ANZ in Hong Kong or NAB in Singapore, no longer provide residential mortgage services to individual customers. These banks now focus exclusively on corporate clients.
  • Obtaining an expat home loan can be challenging due to banks’ stringent policies. Rather than relying on personal relationships or exceptions, borrowers must meet specific criteria to be approved for a loan. Banks have become very policy-driven in recent years, meaning they stick to their rules strictly.

To summarise, banks are still willing to lend Australian property loans to Australian expats and foreign investors, but it’s the regulators, like the Australian Prudential Regulatory Authority that are imposing harsher restrictions on bank lending that is keeping a lid on foreign investment lending.

Get a Free Australian Mortgage Assessment Today.

Apply online to get a free recommendation with real rates and repayments.

Find Out How Expat Mortgages Work

How Do Australian Banks Evaluate Foreign Income for an Expat Home Loan? (Spoiler: It’s Bad, Sort Of)

Typically, lenders will consider only 80% of your gross income, instead of 100% as they would for Australian residents. This reduction is due to foreign currency risk, which means that the lender perceives some currencies as more volatile than others. For example, tier 1 currencies like USD, GBP, and SGD are considered more secure and stable, so lenders would typically reduce your income by 20%. However, currencies like Brazilian Real (BRL) and Turkish lira (TRY) may see reductions by as much as 50%.

In addition to the currency exchange reduction, most lenders will use Australian tax rates to assess your income, regardless of the country you live in. This can be a disadvantage if you live in a low tax rate country such as Singapore, Hong Kong, or the UAE. However, some lenders will allow you to use your local country’s tax rates, which can have a significant positive impact on your borrowing power.

Overall, lenders assess your expat home loan application from a pessimistic, conservative angle to ensure you can still service the loan even in dire situations. By understanding how foreign income is evaluated for an Australian property loan, expats can better prepare themselves for the application process.

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

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 foreign currency will make a significant difference in how much you can borrow as non-resident Australian citizens.

To learn more about buying a home, refinancing an existing home loan or the fees and expenses of buying property in Australia, speak with our specialist mortgage brokers. We specialise in providing the best home loan advice for Australian expats and foreign residents who are looking to invest in Australian property.

Get a Free Australian Property Loan Assessment Today.

Apply online to get a free recommendation with real rates and repayments.

Documenting Your Foreign Income for Aussie Expat Home Loans

When applying for an expat mortgage in Australia as an expat with foreign income, detailed evidence of your income is crucial for approval. You will need to provide:

Foreign Employment Contract and Job Description

Any employment contracts or formal contracts should be submitted with details of your position, responsibilities, salary package, benefits, bonuses, allowances, etc. This should be signed and dated within the last 6 months by your employer.

Foreign Tax Documents

Recent copies of tax returns and tax assessment notices will be required for viewing by the bank. Your broker will advise how many years worth of tax documents to provide based on your situation.

Foreign Currency Conversion

Most lenders will convert your foreign income to AUD for assessment. You may be asked to provide currency conversion documents to justify any rates used.

Other Supporting Evidence

Expats with complex income variables or irregular income types should gather as much evidence as possible to support their application.

Australian Expat Home Loans | Expat Mortgage Australia

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 or with an Australian expat home loan, 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.

To avoid this surcharge, one alternative is to purchase the property solely in the name of the Australian spouse, resulting in only the standard Stamp Duty of $54,052 being levied. Australian citizens living overseas are not subject to any penalty or surcharge.

If an Australian expat home loan application does not meet the lender mortgage broker’s servicing requirements without the foreign partner’s income, some lenders may allow the foreign spouse to be a co-borrower without needing to be on the property title.

Click here to calculate your Stamp Duty or learn more about foreign buyers’ duties.

Do You Need to Pay Australian Tax If You Get an Australian Expat Home Loan?

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

So if your Australian property 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 are unsure about your tax residency status, it’s recommended to seek advice. It’s worth noting that Australian expats can benefit from negative gearing, where 100% of the investment loan interest rate, building depreciation, property management costs, and more can be tax-deductible.

To learn more about maximising your investment from a tax perspective, use our Investment Property Value Calculator.

Case Study

Aussie Expat Couple Matthew & Kylie Living in Hong Kong (High Variable Income) on Getting an Expat Home Loan in Australia

Background:

Matthew works in Finance in a Senior position. The majority of his income comes in the form of Annual bonuses, education allowances for the kids, and housing allowances, which pay for their high rent expenses. 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 Australian expat home loan off as desired.

Problem:

The lenders they approached declined their Australian property 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 for a home loan with foreign income for Australia. 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 Australian expat home 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 Australian property loan 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 Australian Expat Home Loan Approval Starts With the Right Advice

In conclusion, securing an Australian Expat Home Loan can be a challenging process, especially during volatile times and tightened lending policies. However, with the right advice and guidance, it is still possible to achieve your property investment goals in Australia, even with foreign income.

At Odin Mortgage, we are committed to providing personalised assessments and multiple lending options to ensure you have the best chance of approval.

Speaking to an expert and finding out which lender suits you best and structuring your expat home loan application in Australia to meet all the policies will be the key to successfully securing an Australian property loan. You can also read our guide on Property Investment in Australia here.

Get a Free Australian Mortgage Assessment Today.

Apply online to get a free recommendation with real rates and repayments.

Australian Expat Home Loans FAQs

Yes, you can. While there are some challenges in the process, we at Odin Mortgage can provide you with a seamless experience as if you were in Australia.
You can borrow up to 95% including Lender’s Mortgage Insurance (LMI), or up to 80% without LMI. Currently, most banks are lending between 60-80% LVR (loan-to-value ratio) of the purchase price or valuation (whichever is lower).

The amount you can borrow will vary based on your individual circumstances. Check out our How Much Can You Borrow article for more details.

Yes, you can. As long as you can prove your income through payslips, formal bank statements, and employment contracts, your foreign currency will be accepted.

Yes, they can. However, additional requirements may apply, and not all lenders will accept self-employed applicants. Visit our How to Get a Self-Employed Home Loan in Australia page for more information.

Yes, they will. But they will only check your credit score in Australia, not in your country of residence. In some cases, they may ask for a credit report from your country of residence.

In most cases, you don’t need a POA (power of attorney). However, in some situations, a POA may be necessary. We can advise you if this is the case.

It depends on who produces the majority of the income. If the Australian citizen is the primary income earner, it won’t be an issue. However, if the foreign national is the one working, your options may be limited. We can help you navigate this situation.

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

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