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 May 2016, fundamentally as a consequence of APRA and other regulators instituting stricter borrowing requirements - with a particular focus on overseas investors. Some of this has spilled over and affected expatriates - with Australian expatriates now more typically limited to loans of up to 80% of the property valuation. Some flexibility still exists around these figures for expatriates but it tends to be situations where expats have a significant income.
From a practical perspective, most of the difficulties encountered in accessing a loan in these circumstances tend to centre 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. Currently, it is almost impossible to source Australian financing for self-employed expatriates.
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 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 an important aspect of this investment. More so because current non-resident tax rates are substantial, currently commencing at the 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 - we recommend tax advice prior to any property purchase in Australia - and it is why accelerating the payment of a mortgage is often not tax effective whilst a non-resident.
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 the property is purchased as tenants-in-common, rather than as a joint tenancy, FIRB approval may 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 shortly. Your inquiry carries no obligation or commitment on your behalf.