Finding a home in Australia can be an intimidating prospect for expats. There are various factors that could affect the mortgage process and lenders often have policies that aren’t tailored towards expats.
Australian Expats typically have access to up to 80% of a property’s value without Lenders Mortgage Insurance (LMI), though there are some key distinctions between their Australian expat home loan application and that of an Australian resident.
Getting a Home Loan as an Expat
Many Australians living overseas harbour a dream of owning their own home in Australia. Unfortunately, purchasing property can be costly if you don’t have enough cash to purchase it in full.
Australian expats don’t need to sacrifice their lifestyle or finances when they move abroad. By meeting certain criteria, you could qualify for a mortgage to purchase your dream home abroad without needing to make sacrifices in lifestyle or finances.
As an expat, your income can come from various sources. Lenders generally accept the following currencies:
The United States Dollar (USD), Great Britain Pound Sterling (GBP), Euro, Singapore Dollar (SGD), Canadian Dollar (CAD), Hong Kong Dollar (HKD), Japanese Yen (JPY), Swiss Franc (CHF) and New Zealand Dollar (NZD) can all be accepted by some lenders as well. Some also take Chinese renminbi (CNY). Other factors that could impact your eligibility for an expat home loan include where you reside and the currency of income earned.
Getting a Home Loan as a Foreign Investor
Most Australian banks provide home loans to foreign investors, though the criteria are quite stringent. Not only do some lenders charge higher interest rates and specific terms, but some require larger deposits than what an Australian resident could obtain.
As a foreign investor, you must show proof of income from your country of residence. This may include a copy of your passport, work permit or salary advice from your employer.
In addition to the standard mortgage documentation, you may require a letter from your foreign bank confirming your eligibility for the loan and having sufficient funds to repay it. This letter serves as confirmation that you have sufficient resources to meet any repayment obligations.
Income from countries with stable currency values is generally treated more favorably than income from countries whose currencies fluctuate, but it can be challenging to find the best deal. Furthermore, most lenders discount foreigners’ salaries between 60-80% in order to guarantee they can repay their loan at a comparable interest rate in Australia.
Getting a Home Loan as a Self-Employed Expat
Australian expats have access to a range of home loan products tailored to their individual financial requirements from lenders that understand and meet those needs. They can secure loans for new property purchases (investment or owner occupation), refinance existing debt, or purchase a house and land package.
Like with any mortgage application, lenders will assess your income, assets and credit before approving you for a home loan. Self-employed borrowers must demonstrate they have an established source of steady cash flow.
Lenders often request a variety of financial documents, such as payslips, bank statements and tax returns. This is necessary to confirm you have an ongoing income source that isn’t being artificially increased by foreign taxes or dividends.
Many banks will accept foreign income; however they will assess its earning capacity and treat it differently from a local borrower. They take into account currency fluctuation risks, and may require lower deposits from expats who earn this type of income.
Getting a Home Loan as a Dual-Citizenship Expat
Dual-Citizenship Expats often face unique obstacles when applying for a mortgage. This includes proving income and providing documentation necessary for a credit check.
To qualify for a mortgage, you’ll need two years’ worth of pay stubs and bank statements that prove you have enough money for both the down payment and closing costs. In some cases, an escrow account can also be utilized which pays for property taxes and homeowners insurance on your behalf.