Can Expats Get a Mortgage in Australia? A Comprehensive Guide
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As an Australian expat living overseas, you may be wondering whether you can obtain a mortgage in Australia. Moreover, reviewing mortgage documents, getting pre-approval, addressing legal fees, and determining whether lenders accept multiple currencies is only the beginning.
If you have searched for information on expat mortgage Australia without success, do not fret. This comprehensive guide will address everything related to Australian expat mortgages.
Can expats get a mortgage in Australia?
The simple answer to this is, yes, expats can get a mortgage in Australia!
Select lenders in Australia provide Australian expat mortgages for expats living overseas. Even though some major lenders don’t accept Australian expats, you can get an expat mortgage if you apply with the right lender.
How much can Australian expats borrow in Australia?
What might also be music to your ears is that your potential borrowing power is similar to Australian citizens who reside in Australia. In simple terms, the amount you can borrow, referred to as your borrowing power, is similar to what Aussie residents can borrow.
For instance, let’s say you’re looking to invest in an investment property. In that case, you have several options to choose from in terms of Australian home loans and can borrow as much as an Australian citizen living in Australia. On top of that, even investing in property in Australia from overseas doesn’t have to be a challenge.
Borrowing power is determined by your income minus your expenses. There are other factors that can determine your borrowing power, including the country you live in, the currency you are paid in, whether you are self-employed or PAYG, and many other factors.
If you’re looking to borrow to buy an investment property in Australia, there are several other requirements you’ll need to fulfil depending on the lender.
Which factors can affect my borrowing power as an Australian expat?
A few critical factors that affect how much you can borrow include foreign debts, foreign tax rates and your actual income, which lenders will assess—along with the mortgage documents you provide.
What’s also considered necessary are any foreign loans that you have. Your repayments might also be used to calculate your borrowing power if you have several foreign loans.
Get a free Australian mortgage assessment today.
Which mortgage documents do lenders ask for?
Australian lenders require you to provide several mortgage documents, such as foreign tax returns and bank statements detailing your financial position. These documents are essential for the mortgage process or loan application to move forward.
Are payslips and foreign tax returns accepted by Australian lenders?
Suppose the payslips and foreign tax returns you submit are in English. In that case, you should be able to assess them as they can demonstrate how much you are earning and count as income evidence.
Some lenders might have departments specifically for non-resident expat applications who can interpret multiple languages. Translation doesn’t have to be an issue in this case.
How many bank statements are required when applying for an expat mortgage?
Generally, you will need bank statements going back three months to apply for a mortgage. This will be considered evidence of your salary being paid into a foreign bank account.
Which are the steps involved during the mortgage process?
Most lenders will follow a particular mortgage process with a few critical steps for expats, including the following:
1. What happens in an initial mortgage meeting?
Typically, expats looking to get a mortgage in Australia will get in touch with a mortgage broker or lender via a video call to discuss their long and short-term goals. The mortgage broker or lender will ask you questions about yourself, such as the currency you earn in, how you make your income, whether you have children, and whether you already have a mortgage overseas.
2. What is a credit assessment for expat mortgages?
A lender carries out the credit assessment for your home loan. This process involves assessing the information you have provided them to determine your options for an expat mortgage. Your lender suggests you to enhance your credit assessment, such as paying off foreign credit card debt.
In other scenarios, if you are prepared, your lender will ask you if you want to look at expat mortgage products immediately.
Get a free Australian mortgage assessment today.
3. Which product recommendations might I receive for an expat mortgage?
Although expat mortgages can be challenging, some lenders provide certain product recommendations that can ease your mortgage journey. These may include:
Offset accounts
As an Aussie expat, your lender might discuss an offset account with you. An offset account gives you the opportunity to set up a bank account and even withdraw and deposit cash into it while offsetting the loan amount with savings contained in the offset account. This means that if you have a home loan of $775,000 and have $75,000 in an offset account, you pay interest on $700,000.
Redraw accounts
You might have a loan for $800,000 with repayments over 30 years. It might be better if you made repayments of $4,000 each month. Suppose you’ve been paying $5,000 monthly and saving much cash. In that case, you can establish a redraw service, use this as credit and access the additional payments you have contributed to the loan.
Consider discussing a redraw account with your lender for an expat mortgage.
Interest-only versus a principal and interest expat mortgage
They might discuss products such as “interest-only” and “principal and interest payment” mortgages. An interest-only expat mortgage enables you to pay the loan’s interest each month as opposed to the borrowed amount until you reach the term’s end. A principal and interest mortgage lets you pay the principal balance (the borrowed amount) and the interest.
Depending on your situation, you can choose between interest-only mortgages and principal and interest mortgages.
Fixed-rate versus a variable-rate expat home loan
What’s also possible is to choose between fixed-rate loans and variable-rate loans. Fixed-rate home loans require you to pay interest at a fixed rate for a portion of the loan term. A variable-rate home loan requires you to pay interest at a rate that is not fixed.
Combining these two options as an expat is possible regarding fixed-rate and variable-rate home loans. The combination is known as a split rate loan, where you might have a portion of your loan with a fixed rate of interest and the other part with a variable rate of interest.
4. What do mortgage brokers do during the mortgage submission phase?
If you’re discussing products with a mortgage broker, they will narrow your options in line with the many lenders they can offer you. This is a critical phase in response to the question, “can expats get a mortgage in Australia?”. For instance, an Australian expat might be interested in an offset account, which not all lenders will provide. The mortgage broker will then remove the lenders who don’t offer offset accounts to expats from their list.
5. What is the pre-approval phase during the mortgage application process?
Say you’re an Australian expat searching for an investment property worth $1,000,000. The pre-approval phase involves extending an 80% finance, which might be valid for a few months. In the pre-approval phase, you can search for a suitable property.
As an expat, it’s essential to go through the pre-approval phase before locating a property. This is because you could search the Australian property market and find a suitable property but can’t get the Australian property of your dreams as a lender won’t offer you the required home loan for the property value.
6. What does the formal approval stage of mortgage application involve?
The formal approval stage of a mortgage application involves having a dialogue with your Power of Attorney, your lawyer or your conveyancer. You must also arrange a settlement over 45 days to ensure your lender can prepare the loan documents.
Setting sufficient time is critical as you’ll need to get the signature of the loan documents witnessed by an Australian consulate if you do not have a Power of Attorney and send them back.
What is a POA or Power of Attorney, and why do I need one as an expat?
A POA authorises a trusted person to manage, handle and sign loan documents on your behalf.
Some lenders might require you to have one if you’re staying in a country without an Australian consulate/embassy or if circumstance prevents you from getting certain documents signed and witnessed.
Aside from that, most Australian expats do not need a POA. A specialist expat mortgage broker can assist you with the signing process. Odin Mortgage can help you maximise your chances of acquiring a pre-approval and recommend a POA if you require one.
Get a free Australian mortgage assessment today.
Which factors and lending criteria will affect my chances of getting approved?
As an Australian expat or an Australian living abroad, several factors and lending criteria will affect your chances of loan approval in Australia. Let’s look at three crucial factors from foreign currency to the country, de facto relationships and your deposit.
Foreign currencies and countries
To start with, both foreign currency and countries are important factors. Most Australian banks will have a list of currencies and countries they will accept from an expat’s mortgage application. Each lender will have a gold-tier and a silver-tier foreign currency list that can affect loan approval.
De facto relationships
In terms of the mortgage process, although you might think that you will increase your chances of being approved with a double income and being married or in a de facto relationship, expat lending can still be declined if you have only been in a de facto relationship for less than two years.
In other situations, if your partner is an Australian permanent resident or an Australian citizen, this can help your application, and lenders may accept your partner’s income.
Suppose you are a couple considering Australian expat home loans from several lenders, and your spouse is a foreign citizen. In that case, approval from the Foreign Investment Review Board is optional for purchasing a property in Australia.
Deposit capacity
Some Australian banks will expect you to offer them a 30% deposit of the property’s price. A few will accept a 20% deposit, but only a few banks will consider less than this. In this case, you will require Lenders Mortgage Insurance (which is not ordinarily possible for Aussie expats).
Please keep in mind that your chances of getting approval depend on your financial situation and the lender you choose.
During the assessment phase, lenders will assess certain income, including PAYG, rental, and self-employed income. Under certain circumstances, commissions and bonuses might also be considered, but this depends on certain factors.
Which other factors will lenders assess for home loan financing?
Commissioned income or bonuses
Say you receive a commission income or salary corresponding to particular services or products you sell as opposed to an hourly wage. A slightly grey area can be seen for lenders for assessment.
Unfortunately, some lenders will not accept commissioned income, even if you’re highly paid overseas. Getting the mortgage amount you hoped for in Australia as an expat can be challenging.
It often depends on how long you’ve received a bonus or commissioned income overseas. Therefore, your lender will consider whether the commissions you earn correlate with industry standards and the length of time you have been making them.
Get a free Australian mortgage assessment today.
Income types that lenders consider
In Australia, lenders will consider certain income types such as rental income, PAYG or pay-as-you-go and self-employed income. We have already mentioned self-employed income, which is usually acceptable to lenders if you supply an accountant letter and proof of your financial income with statements.
Let’s now focus on PAYG and rental income.
Under which circumstances is rental income acceptable to lenders for expat mortgages?
Rental income or the income gained from your investment property in Australia or overseas is commonly accepted. Still, only a particular percentage of the income is considered. This can primarily come down to the location of your property.
Most lenders potentially accept up to 80% of rental income when assessing home loan financing options.
Which percentage of PAYG income will be considered by lenders for expat mortgages?
A lender will typically consider between 80% and 100% of PAYG income if you earn your income in a tier 1 currency. On the other hand, a lender will typically consider 60% to 80% of PAYG income if you earn in a tier 2 currency.
What conditions do Australian lenders offer for expat mortgages?
Australian lenders offer a few conditions for expat mortgages, such as a 30-year loan term and a choice between variable and fixed-rate mortgages.
Some lenders will even protect you from penalties, and higher rates offered to Australian expats living overseas. The interest rate you are expected to pay will be equal to an Australian citizen residing in Australia.
You can reap the benefits of an interest-only loan if you aim to keep monthly repayments low and maximise your liquidity or cash resources.
Get a free Australian mortgage assessment today.
Which processes do Australian lenders use to assess foreign income?
The short answer is that Australian lenders will assess foreign income from a negative perspective and consider which tier your currency comes under.
What is a tier 1 and tier 2 foreign currency for expat mortgages?
A tier 1 currency is a currency that permits your lender to take on upwards of 80% of your income. A tier 2 currency is a currency that allows your lender to take on between 60% and 80% of your income.
So, when contemplating your borrowing power, the currency tier of your income is vital.
Some examples of tier 2 currencies include the United Arab Emirates Dirham and the South African Rand. In contrast, tier 1 currencies include Great Britain Pounds Sterling and the United States Dollar.
What are some examples of tier 1 currencies for expat mortgages?
Some other examples of tier 1 currencies for expat mortgages include:
- Euros
- Hong Kong Dollars
- Japanese Yen
- New Zealand Dollars
- Singapore Dollars
- Chinese Renminbi
What are some examples of tier 2 currencies for expat mortgages?
Some other examples of tier 2 currencies for expat mortgages include:
- South Korean Won
- Thai Baht
- Malaysian Ringgit
- Philippine Peso
- Indonesian Rupiah
- Arabian Riyal
- Qatari Riyal
- Vietnamese Dong
- Kuwaiti Dinar
Will all my gross income be considered for an expat mortgage?
To put this into perspective, an Australian citizen who lives in Australia would have the luxury of having their gross income (100%) accounted for when the bank assesses their borrowing power. Now, most Australian expats don’t have this luxury.
Instead, approximately 80% of your gross income is considered and accepted. This might not even be the worst-case scenario—it can be as low as 50%.
This is determined by currency fluctuation risks related to the Australian Dollar. Suppose you are offered a lower percentage in terms of your Australian expat home loan. In that case, your currency is viewed as unstable compared to the Australian Dollar.
How do Australian tax rates versus foreign tax rates affect home loan financing?
Unfortunately, home loan financing as an Australian expat can be affected by whether your lender uses Australian or foreign tax rates (that correspond to the tax rates of your country of residence). So as an Aussie expat, it’s essential to pay attention to the difference between these tax rates.
When establishing your home loan, suppose a lender assesses your income with Australian tax rates. In that case, you may need to accept a reduction in your borrowing power.
The main reason Australian tax rates might not be as favourable for home loan financing is that they might be higher than the foreign tax rates that apply to your country of residence.
What other factors should expats consider to get a mortgage in Australia?
Other factors you should consider when considering the question of whether expats can get a mortgage in Australia to include the following:
- Deposit
- Loan-to-value ratio (LVR)
- Property purchasing fees
- Land tax
- Stamp duty surcharge
What is meant by LVR, and what is the maximum for an Australian expat?
In basic terms, LVR, or loan-to-value ratio, represents how much you require in terms of the percentage of the property value. The maximum LVR for Australian expats is usually 80%. Lenders calculate this value by running the following calculation:
The loan amount / the property value * 100%
So, the LVR is a critical part of the mortgage process when you apply when considering your eligibility for a mortgage in Australia.
What is the deposit amount required for Aussie expats?
If you’re an Australian expat looking to buy an investment property in Australia, a 10% deposit is typically expected from major lenders. However, you will also need additional funds for property purchasing costs.
Which property purchasing costs should I be aware of?
Remember that there are some property purchasing costs that you must account for. Some of these purchasing costs include:
- Legal fees
- Stamp duty
- Lenders mortgage insurance
- Costs of setting up the mortgage
What are the land tax and stamp duty surcharge?
Here’s some good news. While land tax might apply to a foreigner living in Australia or a visa holder, Australians living overseas will not have to pay land tax or the stamp duty surcharge unless they’re seeking a mortgage with a wife or husband who is not an Australian citizen.
However, you can avoid stamp duty if the loan title is in the name of the Australian expat.
Can expats get a mortgage in Australia with the support of a guarantor?
To answer this question, it is possible for expats to get a mortgage in Australia with the support of a guarantor, provided the guarantor lives in Australia.
A guarantor arrangement entails using the equity in an expat’s parent’s property as security or secured charge for the purchase deposit. In this sense, as an expat, you would service the loan of 80% in addition to the 20% loan using foreign income, and your parents will provide equity to secure part of your expat mortgage.
A guarantor home loan, therefore, has a few advantages. Your lender will view you as less of a risk, and you can get the funding you require even in the event you don’t have the 20% deposit saved already.
Who should I choose as my guarantor when applying for an expat mortgage in Australia?
Since major lenders request that you choose an immediate family member as your guarantor, you might think this is your only option. However, some lenders will permit you to select grandparents and relatives as guarantors for your home loan application.
There are particular eligibility requirements when you choose a guarantor. The main eligibility requirements include that your guarantor has:
- A stable income
- Property equity that can be put forward as collateral
- A good credit score and file
Are expat mortgages expensive?
Expat mortgages typically come with higher rates, stricter criteria, and a larger deposit requirement. This makes expat mortgages relatively more expensive and challenging compared to mortgages for Australian residents.
However, applying with the right lender can help you get a more suitable product for your financing needs.
What can I do to find the right expat mortgage in Australia?
By soliciting the services of a good mortgage broker, you can find the right expat mortgage in Australia. Since there are variations between each lender, i.e., some lenders will offer you an 80% LVR and others will provide you with a 70% LVR.
It’s crucial to get the assistance of a mortgage broker, who will match you to the ideal lender and provide you with helpful recommendations to maximise your outcome.
Can expats get a mortgage in Australia? Yes! Go with Odin Mortgage!
Expats can get a mortgage in Australia, and there are many lenders and mortgage providers to choose from.
At Odin Mortgage, we make applying for a mortgage in Australia as an expat living abroad effortless. If you are searching for a perfect mortgage application with plenty of support and advice on the entire process, choose Odin Mortgage today.
Get a free Australian mortgage assessment today.
FAQs about Australian expat mortgages
What does lender policy mean in terms of expat mortgages?
Lender policies refer to the guidelines established by lenders and how lenders treat expat borrowers.
In some circumstances, a lender policy can change significantly, so much that they don’t accept foreign currency as part of their policy. It helps to recognise that lenders can make small policy changes frequently. Still, from time to time, they can make significant changes.
Can expats get a mortgage in Australia as a non-resident?
Yes, you can get a mortgage in Australia as a non-resident. Although major lenders will prefer to lend to Australian citizens or permanent residents, mortgages are available for non-residents. You might face a higher interest rate for mortgages as a non-resident, but they are competitive.
There are, however, some strict requirements compared to Australian citizens or those Aussies living in Australia as permanent residents. For example, you might be expected to come up with a bigger deposit for your home loan than Australian permanent residents. You might be asked to prove that you have previously had an income from Australia.
Does pre-approval for an expat mortgage mean that I will be approved?
Unfortunately, you are not guaranteed a home loan or expat mortgage just because a lender has pre-approved you. You can still be denied or declined for an expat mortgage even after the pre-approval stage.
As an expat, you must go through the formal application stage after pre-approval to get the ball rolling in formal approval. For pre-approval, you can expect to receive this for three months, provided you meet the lender’s guidelines and lending policies. This usually is sufficient time to find the ideal property.
Still, you can ask your lender to extend the pre-approval period, for which they will request additional updated documents for your expat mortgage.
Which factors might make it difficult for me to be approved for an expat mortgage?
A few factors can prevent you from being approved for an expat home loan. This can include:
- Debt that you haven’t paid
- The type of foreign income that you earn
- The fact that your actual income (including commissions) is not considered
- When your spouse’s income is not accepted because they are a foreign citizen.
These can make it challenging to be approved for a particular expat home loan ideal for your specific circumstances.
Other factors may include:
- A high loan-to-value ratio
- Changes in employment statuses
- A history of failing to make payments for other mortgages
- An appraisal is lower than expected (since your lender will not offer you a higher amount than the property value).
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