Australian expats often move overseas with the goal of taking advantage of both higher wages and lower taxes. For that reason, they want to use their higher-income to obtain an expat mortgage in Australia.
The guidelines and Credit Policy for most banks is quite different for Australian expats who are looking to apply for a loan to buy an Australian property and this needs to be taken into account from the outset as it can have a significant impact on your borrowing capacity.
Generally speaking, it’s possible to borrow up to 70-80% of the property’s value and in some circumstances also up to 85% and not pay Lenders Mortgage Insurance (LMI) as an expat.
One of the key differences between Aussie expat home loans and loans issued to those currently residing in Australia is that lenders will not accept all foreign currencies.
While all lenders have different policies, generally the main currencies that will be accepted as a form of income include the United States Dollar (USD), Great Britain Pounds Sterling (GBP), Euro (EUR), Singapore Dollar (SGD), Canadian Dollar (CAD), United Arab Emirates Dirham (AED), Hong Kong Dollar (HKD), Japanese Yen (JPY), Swiss Franc (CHF) and the New Zealand Dollar (NZD).
There are other currencies that are accepted, however, you might be forced to borrow at a lower LVR.
Generally speaking, some lenders don’t offer discounted rates on Aussie’s expat home loans, however, the actual rate is comparable on most standard home loans and you should be able to obtain the maximum rate discount if you engage a broker that specialises in foreign income loans. Again, this will differ on a case-by-case basis.
As with most lenders, if you are unable to provide standard proof of income you will likely be forced to pay a higher interest rate, or be inelligble for a loan
LVR and LMI
Some aussie expat home loans are available up to a 90% LVR, however, the borrower will be required to pay Lenders Mortgage Insurance (LMI) which can be quite substantial. Alternatively you may be able to access a 85% LVR loan and not pay any LMI if you meet certain special criteria
Unlike within Australia, where some lenders offer home loans at higher 90% LVRs without the need to pay LMI to certain professions such as Doctors, Accountants or Lawyers, this is not available to expats. If you engage a specialist foreign income broker, they may be able to advise for expats living in UK, USA, Hong Kong, Singapore on how to obtain a loan as an expat that can be converted to one of these specialised loans when you repatriate back to Australia.
Tax Implications and Currency Fluctuations
It’s important to note that Australia has some of the highest tax rates in the world and different lenders will assess your income based on an Australian tax rate. This can mean your borrowing power is significantly reduced.
Similarly, given the fact that currencies fluctuate in value, many lenders will only accept a certain percentage of your income (60-90%) in a foreign currency to make sure they are protected in the advent of an adverse currency move.
It’s also worth noting that any negative gearing tax benefits won’t be included for aussie expat home loans when assessing serviceability.
Home Loan Options for First Time Buyers
Many young couples head overseas with the goal of setting themselves up financially and purchasing an investment property that will eventually become their principal place of residence when they return. There are a number of home loan options for first time buyers who happen to be expats. It’s important to consider the type and nature of your income and you’ll also be unlikely to qualify for the first home buyer exemptions and bonuses as they are predominantly focused on owner-occupied properties, although this can work in certain circumstances.