Whether you are an Australian living abroad or an expat living in Australia, there are some added complexities when it comes to getting a mortgage. The landscape for expat mortgages in Australia is constantly changing, and the institutional appetite for these loans can vary. Here, we talk to Apt Wealth Home Loans Mortgage Broker Matthew Baker about what you need to know.
Matthew Baker: It’s challenging to provide a simple answer on whether you can get a mortgage as a non-resident or expat as it varies from lender to lender. Individual circumstances also play a significant role in the lender’s decision-making process.
Some lenders won’t entertain these loans at all; others may require larger deposits, offer higher interest rates or ask for a mountain of documentation. In addition, the lender appetite for these types of loans is constantly changing, making it even harder to navigate.
It is possible to secure a mortgage, but it’s an area where the advice of a mortgage broker who understands the expat landscape and your specific circumstances is invaluable. It can save you significant time, frustration and even heartbreak in your search.
Here are some areas that need extra consideration for expats:
Typically, lenders require 20% of the purchase price as a deposit. In some cases, institutions will lend to those with a lower deposit; however, they require you to pay additional fees for Lender’s Mortgage Insurance (LMI). In some cases, lenders will not offer LMI to expats, either Australians living abroad or expats living on our shores. This means you will need at least 20% and, in some cases, up to 40%, as some institutions will ask those with foreign income for more equity.
Treatment of foreign income
Your borrowing power is typically determined by your net income, less your expenses. However, if your income is derived from foreign sources, the lender may shade your income by up to 80%, significantly limiting your borrowing capacity and, therefore, your buying options. If you are applying as a couple and one partner is an expat, their income may be heavily shaded or not considered at all.
This is due to the currency risks at play, where the value of your income in Australian dollars can change with market movements. For this reason, income earned in more volatile currencies is likely to be dismissed entirely.
The lender will also apply Australian tax rates to your income, regardless of where it is derived. If you are earning in a low-tax environment, your income for borrowing purposes is likely to be significantly reduced.
Intended purpose of the property
An institution’s appetite for lending to expats will vary depending on whether it will be an owner-occupied or an investment property. Typically, getting a loan for an investment purchase will be more challenging. However, it’s not impossible.
Expert advice is a must
When purchasing property as a non-resident, there can be several additional considerations, from tax implications to non-standard lending criteria. For this reason, it’s best to work with a team of experts who understand the landscape and will take the time to understand your specific circumstances, from your tax agent to your financial planner and mortgage broker.
Apt Wealth Partners specialises in all aspects of financial planning for expats. Find out more at https://aptwealth.com.au/what-we-do/expert-financial-planning-for-expats/.
General Advice warning
The information provided in this blog does not constitute ﬁnancial product advice. The information is of a general nature only and does not take into account your individual objectives, ﬁnancial situation or needs. It should not be used, relied upon, or treated as a substitute for speciﬁc professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.