Arranging Domestic Mortgages (AUD) for Australian Expats
Exfin provides access to home mortgage finance for Australian expatriates (citizens and PR's), new migrants to Australia and temporary residents.
Some special issues do apply in relation to these sort of loans, which we address in more detail below, but we are typically able to arrange mortgages for Australian expats up to 80% of the property value, and up to 90% in the certain circumstances. However, access to finance can depend on a number of issues, including your specific financial circumstances, currency of remuneration and location.
Expats frequently have circumstances "outside the norm" as far as the Australian domestic lenders are concerned and, for that reason, it is recommended that you utilize a mortgage broker who is experienced in dealing with expatriate/offshore loans. Processes differ significantly between various lenders; a number of major lenders will not deal with expatriates and you can waste a considerable amount of time pursuing a loan with a provider who is not a good match for your circumstances.
In most situations, no cost attaches to the use of a mortgage broker and, in our case, you will have access to almost all mortgages available in the Australian market.
|Note that specific restrictions apply in relation to the refinancing of an existing Australian mortgage while non-resident and we address these in a page devoted to expatriate mortgage refinancing.|
How much can you Borrow?
The table below provides a short summary of the maximum lending rates available to three Categories of Borrowers. We also suggest that expats seek tax advice about the appropriate level of gearing prior to concluding your purchase, if you intend to rent the property.
|Categories of Borrower||Maximum Borrowing Capacity|
|Expats - Non-resident Australian citizens and permanent residents||70 - 90% (1)|
|New Zealand citizens resident in Australia||70 - 90%|
|Temporary residents living in Australia||0 - 80%|
As we mention above, there are circumstances where loans of up to 90% of a property's valuation may be available, but they are currently limited to individuals being remunerated in the following currencies: CAD, Euro, GBP, HKD, NZD, SGD and USD. Note that the 90% is inclusive of lenders mortgage insurance (LMI) which is usually payable in Australia when a property's loan to valuation ratio (LVR) exceeds 80%, and why we normally suggest that expats provide a 20% deposit, if possible.
Applicants who are remunerated in other currencies may be accepted by the lenders, but it will always be at the discretion of the lender and certain currencies may be subject to lower maximum lending rates. For example, you may see different levels of lending available to individuals employed in the Middle East, depending upon whether they are paid in USD or the local currency (e.g. 90% vs 70%), even if the local currency is pegged to the USD.
Current Indicative Mortgage Rates
On November 7, 2023 the RBA announced a 0.25% increase in the cash rate to 4.35% - the highest rate in nearly 11 years. The rates below represent current indicative mortgage interest rates applicable in November, 2023.
|Type of Mortgage||Interest Rate|
|Standard Variable Rate - Owner Occupied (P & I )||From 5.99% p.a.|
|Standard Variable Rate - Investment (P & I)||From 6.24% p.a.|
|Fixed Rate Home Loan - Investment (P & I) - 5 years||From 6.19% p.a.|
In practice, it may be possible to access rates lower than the standard variable rates above - with borrowers able to access introductory first year or "honeymoon" interest rates, or participate in "professional package"offers. Professional packages can reduce interest rates significantly, depending on the size of the loan, and offer other account benefits in return for the payment of an annual account fee.Whether these packages, and other offers, suit your circumstances needs to be the subject of discussions with the bank or broker.
Note that slightly higher rates apply for investor loans and that it has become more difficult, but not impossible, to source interest only loans. Interest rates and loan conditions will depend on your location and circumstances - with not all lenders covering all countries and all types of borrower - hence why the interest rates quoted are indicative only. Any analysis should also be predicated, at the moment, on the assumption that interests rates may still have scope to move upwards slightly as at the end of 2023 before trending down on the basis of subdued activity in 2024.
Answering some FAQ's
- Both variable-rate and fixed-rate mortgages are available and it is possible to arrange a "split rate" loan, which contains both a variable and fixed rate component.
- A 30 year loan term is available for most borrowers, but if you are over 45 the precise term available will depend on your personal circumstances, other assets and retirement strategy.
- In most circumstances there is no interest rate margin/penalty attaching to being an expat and you will access the same interest rates as Australian residents applying to same lender for the same product.
- There no early repayment penalties - but an administrative or discharge fee may apply when paying off your loan, typically around $300.
- In terms of calculating servicing capacity, Australian lenders will only take into account the income of Australian citizens or permanent residents - hence, if one member of a couple is neither an Australian citizen or PR then their income may not be taken into account by the lender.
- In most circumstances, you are able to obtain or release equity from existing Australian properties you own to borrow more for investment purposes, such as buying another property, financing renovations etc.,
From a practical perspective, most of the difficulties encountered in accessing a loan in these circumstances tend to center around establishing your income and other financial details to the satisfaction of the bank. For example, if your payslips are not in English, you may be required to have them translated and/or certified, or provide a supporting letter from your employer. Payslips in themselves can be complex in some situations to "decipher" and you may need to provide some supporting information or interpretation.
Some banks also have understandable difficulties in assessing an individual's financial position where, for example, their income may look inadequate at first glance to support the loan - but that income is being earned in a no tax environment or where the individual's housing, transport, medical and education expenses are all being met directly by the employer and their cost of living is appreciably lower. It is the responsibility of the broker, particularly given the time differences that often exist, to manage these issues appropriately and pre-empt lender requirements where possible.
Tax is an important aspect of any property investment. More so because current non-resident tax rates are substantial, currently starting at 32.5% with no tax-free allowance, and because tax losses made on these investments can be accrued indefinitely and used to either offset income tax or CGT on sale. This can directly impact the most effective level of gearing in individual circumstances - and we recommend tax advice prior to any property purchase in Australia. This is also why accelerating the payment of a mortgage is often not tax effective while a non-resident.
Expats with spouses or partners who are neither Australian citizens or PR's should also be aware that most States and Territories apply significant stamp duty surcharges to foreign purchasers of Australian residential property - and these surcharges may apply in relation to half the property valuation if purchased on a joint tenancy basis.
Finally, a note of caution. Australian citizens and permanent residents do not have to seek FIRB approval before purchasing land and property in Australia. However, if they buy in partnership with someone who is not a citizen or PR and not their spouse or partner, or the property is purchased on a tenants-in-common, rather than joint tenancy, basis then prior FIRB approval will be required.
For reference in this regard please see page 62 of the Foreign Investment Review Board Guidance 2, where specific exemptions are addressed - on the basis that prior legal advice should always be sought in these situations:
"Specific exemptions applying to investments in residential land:
- acquisitions for diplomatic or consular purposes (section 37(5));
- acquisitions by a New Zealand citizen eligible for a special category visa (section 38(2));
- acquisitions by the holder of an Australian permanent resident visa (section 38(2)); acquisitions by an individual purchasing land as joint tenants with their Australian citizen spouse, Australian permanent resident spouse, or New Zealand citizen spouse (who is eligible for a special category visa) (this exemption does not include purchasing property as tenants in common) (section 38(3))"
If you would like to make an inquiry regarding an Australian mortgage please complete the Inquiry form below and we will respond promptly.