Expat Australians, You CAN borrow money to snag that dream property in Australia!
Over the last few years, government regulations have tightened up on credit policies for Australian expats. These new restrictive regulations aim to keep a closer eye on foreign investment and curb money laundering risks in the residential property market, unfortunately impacting Australians living and working overseas trying to secure a piece of the Down Under real estate pie.
That being said, have no fear- this dream is still alive; there are just a few more policy hurdles to navigate to attain it.
Let’s dive into what IS possible for you as an Australian Expat keen on buying property:
You’ve got the choice between fixed-rate and variable-rate mortgages. Feeling a bit indecisive? Go for the split-rate loan– it’s a combo of the best of both worlds.
Forget about those early repayment penalties! That ship sailed ages ago. Now, you only have to cough up a one-off discharge fee when you pay off your loan.
Got some real estate gems already? If so, you can tap into their equity to borrow more for exciting stuff like buying another property or sprucing things up a bit with renovations.
If you’re into minimal monthly payments and maximum cash flow flexibility, interest-only repayment loans are still on the table.
No need to stress over penalties or interest rate quirks for being an expat. Stick with the same bank and product, and you’ll get the same interest rates as any other Australian resident.
Age is just a number. With up to 30 years’ terms available, you can chipping away at it as soon as you’re ready!
Now, let’s go over what’s NOT in the cards for you as an Australian expat eyeing that dream home:
Despite the Australian Dollar’s rollercoaster since 2011, no more multiple currencies in loans from Australian banks. It’s all in AUD now.
To get the loan green light, you’ll need to meet specific criteria. No more relying on personal relationships or special exceptions as you might when you’re an Australian resident. Banks are strictly playing it by the book these days.
Australian-based banks abroad, like NAB in Singapore and ANZ Hong Kong, won’t hook you up with residential mortgages. They’ve shifted gears and are all about those corporate clients instead.
So, if you haven’t figured it out by now, securing your dream Australian home might require a bit more legwork. But hey, it’s totally worth it! There are institutions who are ready to guide you through this intricate process, such as Australian Expat Finance and Odin Mortgage. They’ll take into account things like:
Income Types- Your broker will sift through all your worldwide income, and depending on where you earned it, they might apply a discount, giving it a bit of a markdown.
Loan to Value Ratios- This is the gap between your deposit/equity and the amount you need to borrow. For expats, it’s generally 70-80% LVR, compared to 80-90% for Australian residents.
Currency Factoring- Lenders will shave off a bit from the value of your income to adjust for foreign currency movements. It’s like a discount due to the perceived volatility of some currencies. Stable ones like USD, SGD, and GBP might see a 20% reduction, while the more unpredictable ones like TRY and BRL could take a 50% hit.
Application of Tax- National tax on your total income, including Australian income tax and local taxes where you’re based, will be considered when assessing your disposable (after-tax) income for loan payments. Living in a low tax rate country? Some lenders might let you use your local country’s tax rates, giving your borrowing power a welcome boost.
Interest Rates and Buffers- APRA sets the rules to ensure you can handle your mortgage if interest rates rise. The buffer is generally around 3%.
Adding to the mix, there are a few more things worth noting, such as:
If you’re teaming up with your foreign spouse to buy your Australian-based home, brace yourself for potentially doubled stamp duty costs. But fret not! There are savvy ways around this, like snatching up the property solely in the name of the Australian spouse. Good news for Australian citizens living overseas– no penalties or surcharges for you. Alternatively, if the Australian’s spouse’s home loan application needs a little boost from the foreign spouse’s income in order to be approved, some lenders might green-light the foreign spouse as a co-borrower without landing on the property title, avoiding the additional costs.
You’ll need to consider possible taxes on your new abode such as land tax (if the total land value in your state surpasses the threshold limit), Victorian Vacancy tax (if your property is left vacant in Victoria), and the capital gains tax (when you sell the property and make a profit). Also consider foreign withholding tax on sale 12.5%.
Self-employed expats may have additional hoops to jump through when applying for an expat home loan.
When you apply for an expat mortgage, you’ll have to provide detailed evidence of your income in order to be considered. You’ll have to provide foreign employment contracts, a job description that’s freshly signed and dated within the last six months by your employer, foreign tax documents, foreign currency conversion documents, and any other supporting evidence if you’re an expat with complex income variables or irregular income.
So there you have it- a bit more hustle, but the payoff? Oh-so-worth-it! FRE.DM Wealth is here with any residual questions you may have on this process- we’re itching to help you secure your dream Australian home. Happy House Hunting!
