Arranging Domestic Mortgages (AUD) for Australian Expatriates
Up until relatively recently, the last five to ten years has been characterised by a dramatic improvement in the ability of Australian expatriates to access domestic Australian mortgages. Not all lenders exhibited equal amounts of flexibility, but in most situations Australian expatriates could expect to access a mortgage to the value of up to 90% of the property value, on exactly the same terms as a borrower in Australia.
Some of these vectors changed during the course of 2016, fundamentally as a consequence of APRA and other regulators initiating stricter borrowing requirements - with a particular focus on foreign investors. Some of this has spilled over and impacted expatriates - with Australian expatriates now more typically limited to loans of up to 80% of property valuations. Some flexibility still exists around these figures but it tends to be in situations where expats have a significant income, or are remunerated in a major international currency.
The Royal Commission into Banking also resulted in a much more stringent lending and compliance environment, which threatens to reduce some of the progress made in terms of finance for expatriates - particularly for those who are self-employed or or whose circumstances are "out of the ordinary". Consequently, it is currently - in the early part of 2020 - still impossible to access normal domestic mortgage finance for self-employed expatriates; the only finance accessible is that offered to foreign investors, which is appreciably more expensive.
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. 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 also 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. This can have an impact on 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 whilst a non-resident for tax purposes.
One 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 the property is purchased as tenants-in-common, rather than as a joint tenancy, FIRB approval will be required.
If you would like to make an inquiry regarding an Australian mortgage, please complete our Inquiry form and a mortgage broker will respond promptly.