Guide to Contractor Mortgages for Australian Expats
As an Australian expat living and working overseas, finding the right mortgage can be a daunting task. With confusing rules, fluctuating income, and a range of lenders to choose from, it’s no wonder you may feel overwhelmed. But don’t worry!
This comprehensive guide will help you navigate the world of contractor mortgages and achieve your dream of homeownership.
Australian Expats and Contractor Mortgages: Eligibility, Requirements, and Alternatives
Australian expatriates living overseas can still qualify for contractor mortgages, but there may be additional eligibility criteria and requirements to meet. Here’s what expats need to know about securing a mortgage as a contract worker.
Eligibility Criteria for Australian Expats
While the exact eligibility criteria may vary between lenders, expats typically need to meet the following conditions:
- Australian citizenship or permanent residency status
- Proof of stable contract work overseas in a similar field as their previous Australian employment
- Sufficient income to cover the mortgage repayments and other living expenses
- A valid Australian credit history
- A minimum deposit (usually at least 10-20% of the property’s value)
What Lenders Ask for From Expats
In addition to the standard documentation required for contract workers, Australian expats may also need to provide:
- Proof of overseas residency (e.g., visa, utility bills, or rental agreements)
- A copy of the employment contract, including details on income and contract length
- Foreign income tax returns and bank statements to verify income
- Proof of any Australian income sources (e.g., rental income or dividends)
- An Australian credit report or a credit report from the country of residence
Get a free Australian mortgage assessment today.
Alternatives for Expats Who Don't Qualify
Low Doc Home Loans
Low doc home loans offer an alternative for subcontractors struggling to provide the financial documentation required for a traditional mortgage application. These loans require less documentation, making them a popular option for those who have difficulty proving their income.
Let’s explore the benefits and drawbacks of low doc home loans.
Easier approval process: Low doc loans are designed for borrowers who cannot provide the standard documentation required for a traditional mortgage. As a result, the approval process is often less stringent, making it easier for subcontractors to secure a home loan.
Higher interest rates: Low doc loans typically come with higher interest rates than standard home loans, as lenders perceive them as riskier. This can result in higher monthly repayments and increased overall borrowing costs.
Flexible income verification: Instead of providing extensive financial documentation, subcontractors may only need to supply a signed income declaration and limited financial records, such as BAS statements or bank account statements.
Higher fees: Low doc loans often include additional fees, such as application fees, ongoing fees, or a higher loan-to-value ratio (LVR), which may require you to pay lenders mortgage insurance (LMI).
Access to homeownership: For subcontractors who have difficulty obtaining a traditional mortgage, low doc home loans can provide an opportunity to achieve homeownership and build equity.
Stricter lending criteria: Despite the reduced documentation requirements, some lenders may impose stricter criteria for low doc loans, such as a larger deposit or a lower maximum loan amount.
Limited loan features: Low doc loans may not offer the same range of features as traditional mortgages, such as offset accounts or flexible repayment options, limiting your ability to tailor the loan to your needs.
Note: While low doc home loans can be a lifeline for subcontractors, they may not be the ideal solution for everyone. It’s essential to weigh the pros and cons before deciding if a low doc loan is right for you.
Other alternatives you can consider may include:
- Expatriate Home Loans: Some lenders offer specialised home loans for Australian expats. These loans typically have higher interest rates and fees than standard mortgages but can provide a pathway to homeownership for expats who don’t qualify for a contractor mortgage.
- Joint Application: Partnering with a family member or friend who has a more stable employment history or higher income can increase your chances of mortgage approval. Both parties will be equally responsible for the mortgage repayments and jointly own the property.
- Guarantor Loans: A guarantor, usually a parent or close family member, can use their property as security for your loan. This can help you avoid the need for a large deposit and may improve your chances of approval. However, the guarantor is responsible for repaying the loan if you default on your repayments.
- Non-resident Home Loans: Some lenders offer non-resident home loans specifically designed for expats and foreign investors. These loans may have different eligibility requirements and may be subject to government regulations and taxes.
Consulting a mortgage broker experienced in loans for subcontractors can help you determine the best course of action based on your unique financial situation.
Buying a House as a Contract Employee
Purchasing a home as a contract employee doesn’t have to be a daunting process. By following these essential steps, you’ll be well on your way to securing your dream home:
Assess your financial situation and determine your borrowing capacity: Before you start house hunting, it’s crucial to understand how much you can afford. Review your income, expenses, and any outstanding debts to determine your borrowing capacity. Consider using an online mortgage calculator to estimate your potential loan amount and monthly repayments.
Choose the right mortgage broker for your needs: A mortgage broker with experience in contractor mortgages can be invaluable in helping you find the right loan for your unique situation. Look for a broker with a proven track record, excellent client reviews, and an extensive network of lender contacts.
Gather all necessary documentation: As a contract worker, you’ll need to provide additional documentation to prove your income and employment stability. Be prepared to submit copies of your contracts, payslips, tax returns, and bank statements. If you have a consistent work history or future contracts lined up, gather evidence to strengthen your application.
Research various loan options and lenders that cater to contract workers: Not all lenders are willing to work with contract employees, so it’s essential to find those that offer mortgage products tailored to your needs. Investigate different loan types, such as low doc loans or loans specifically designed for contractors. Compare interest rates, fees, and loan features to identify the best options for your circumstances.
Submit your mortgage application and await approval: With the help of your mortgage broker, complete and submit your mortgage application. Ensure all required documentation is included to avoid delays in the approval process. Be prepared for the possibility of additional questions or requests for information from the lender.
Find your dream home and make an offer: Once your mortgage pre-approval is in place, you can confidently begin your search for the perfect home. Work with a real estate agent who understands your needs and can help you find properties within your budget. When you find the right home, submit an offer and negotiate the terms of the sale.
Complete the settlement process and move into your new home: After your offer is accepted, you’ll need to complete the settlement process, which includes organising inspections, finalising the mortgage, and signing the necessary legal documents. Once everything is finalised, it’s time to move into your new home and enjoy the benefits of homeownership as a contract employee.
By following these essential steps, you’ll be well-prepared for the home-buying journey and increase your chances of securing a mortgage that fits your unique needs as a contract worker.
Get a free Australian mortgage assessment today.
Can You Get a Home Loan on a Fixed Term Contract?
The short answer is yes! Despite the common misconception, you can secure a home loan on a fixed-term contract. Many lenders recognise the growing trend of contract work and offer mortgage products tailored to your unique situation.
To qualify, you’ll need to meet specific criteria, such as:
- Minimum contract length: Lenders typically require at least six months remaining on your current contract or a history of contract renewals in the same industry. This requirement helps demonstrate your ongoing employment stability.
- Consistent work history: A stable work history in your field is crucial for lenders to assess your ability to maintain income and make mortgage repayments. Aim to provide at least two years of continuous contract work to increase your chances of approval.
- Proof of future employment: Lenders want assurance that your income will continue. Provide evidence of future contracts or job offers, if available, to demonstrate your ongoing earning potential.
- Good credit history: A strong credit history can boost your chances of securing a home loan on a fixed-term contract. Ensure your credit report is accurate and address any discrepancies before applying for a mortgage.
- Sufficient deposit: Saving a substantial deposit can improve your chances of approval and potentially reduce the interest rate on your loan. Aim to save at least 20% of the property’s value as a down payment.
By meeting these criteria and working with a mortgage broker experienced in contractor mortgages, you can secure a home loan on a fixed-term contract and achieve your homeownership goals.
How IT Contractors Can Overcome Home Loan Hurdles
IT contractors are in high demand, but many still struggle to secure a mortgage due to their employment status. To overcome this challenge, follow these expert tips:
- Focus on lenders who specialise in contractor mortgages: Some lenders understand the IT industry and offer tailored mortgage products for IT contractors. These lenders are more likely to appreciate your unique employment circumstances and higher earning potential.
- Provide evidence of your earning potential and job stability: Highlight your skills, qualifications, and experience in the IT sector to demonstrate your value in the job market. Provide contracts, references, and certification to show a history of consistent work and the likelihood of ongoing employment.
- Maintain a strong credit history: A solid credit history can significantly improve your chances of securing a mortgage as an IT contractor. Regularly review your credit report and take steps to address any issues that may be affecting your credit score.
- Work with a specialist mortgage broker: Seek the help of a mortgage broker who specialises in IT contractor mortgages. Their experience and industry knowledge can help you navigate the application process and find the best loan options for your needs.
By following these tips, IT contractors can overcome common home loan hurdles and secure a mortgage that aligns with their unique employment situation.
Do You Need a Permanent Job to Get a Mortgage? Debunking the Myth
Many people believe that having a permanent job is a prerequisite for getting a mortgage. However, this is not necessarily the case. While it may be easier for permanent employees to secure a home loan, many lenders are willing to work with contract workers, freelancers, and self-employed individuals.
The key is finding a lender who understands your unique employment situation and is willing to offer mortgage products tailored to your needs.
Securing a contractor mortgage as an Australian expat may seem challenging, but with the right guidance and persistence, it’s entirely achievable. By arming yourself with knowledge, partnering with a skilled mortgage broker, and exploring various loan options, you’ll be well on your way to making your homeownership dreams a reality.
Get a free Australian mortgage assessment today.
FAQs: Your Contractor Mortgage Questions Answered
The minimum contract length varies depending on the lender, but most require at least six months remaining on your current contract or a history of contract renewals in the same industry.
Income verification for contractors typically includes providing recent payslips, tax returns, and bank statements. Some lenders may also require copies of your contracts and invoices.
It may be more challenging, but it’s not impossible. Some lenders specialise in working with borrowers with less-than-perfect credit. A mortgage broker can help you find a suitable lender and guide you through the application process.
Yes! Some lenders offer tailored mortgage products for IT contractors, recognising their unique employment circumstances and higher earning potential. A mortgage broker with experience in IT contractor mortgages can help you find the right loan for your needs.
Yes, many lenders offer low doc loans for investment properties. However, it’s essential to carefully consider the higher interest rates and fees associated with these loans before committing.