Skip to main content
Exfin Home Exfin Home
  • Home
  • About the Company
  • Site Map
  • Contact Us
  • Financial Planning
    • Expatriate Financial Issues
    • Planning Process
  • Tax Advice
    • Australian Tax Residency
    • Capital Gains Tax (CGT)
    • Foreign Income
    • Overseas Redundancy
    • Tax Effective Salaries
    • Fly in - Fly out
    • Income Tax Rates
    • Offshore Trusts
    • Australian Tax FAQ's
    • Company Tax
    • Foreign Companies - Tax
    • US Tax Advice
    • FBAR, FATCA Reporting
    • Super and US Tax
    • US Taxation - FAQ's
    • 457 Visa - Tax and Finance
    • UK Tax Advice
    • Novated Car Leases
  • Superannuation
    • Contributions & Benefits
    • Taxation of Super
    • Super for non-residents
    • Contributing from Overseas
    • International Funds
    • SMSF's - Residency and other requirements
    • Transferring Pension Funds
    • Australian Pensions
    • Temporary and Previous Residents
  • Pension Transfers
    • Pension Transfers to Australia - Issues
    • Australian Taxation
    • Which Super Fund?
    • Large Pension Transfers
    • UK to Australia - QROPS
    • UK Pension Changes 2015
    • Pension Transfers - FAQ's
    • State Pensions
    • US Pension Transfers
    • South African Pensions
  • International Retirement
  • Investments - ASX Shares
    • Selling from Overseas
  • Australian Mortgages
    • Australian Expat Mortgages
    • Australian Mortgages for New Zealanders
    • First Home Owners Grant
  • Foreign Currency Mortgages
  • International Mortgages
    • UK Mortgages
    • French Mortgages
    • Italian Mortgages
  • Life Insurance
    • Life Insurance Options
    • Life Insurance Products
    • Life Insurance for Migrants
    • 457 Visa Life Insurance
  • Health Insurance
    • Choosing Health Insurance
    • Medicare while Overseas
    • 457 Visa Health Insurance
    • For Employers
  • Travel Insurance
    • 457 Visa Travel Insurance
    • Seniors Travel Insurance
  • Legal Advice
    • Divorce Overseas
    • Custody of Children
    • Property Issues
    • Wills
    • Power of Attorney
    • Australian Citizenship
  • Real Estate
    • Real Estate Prices
    • Capital City Prices
    • Buying Costs
    • Selling Costs
    • Renting Out Property
    • Foreign Buyers
  • Foreign Exchange
    • Transferring Forex
    • Bank Alternatives
    • Forward Contracts
    • Forex Charts
  • Expatriate Jobs
    • Career Issues
    • Personal Issues
    • Financial Planning Jobs
  • Consultancy
    • Cost of Living
  • Accommodation
  • Banking
    • Offshore Banking
    • Banking for Migrants
  • Education
  • Travel Warnings
    • Emergency Information
    • Rainfall - Asian Cities
  • News and Views
  • VPN for Expats
  • Commentary
  • Voting Overseas
  • Australian Expatriate Links
  • Relocation Checklist
22 April, 2018

Services

  • Financial Planning
  • Tax Advice
  • Superannuation
  • Pension Transfers
  • International Retirement
  • Investments - ASX Shares
  • Australian Mortgages
  • Foreign Currency Mortgages
  • International Mortgages
  • Life Insurance
  • Health Insurance
  • Travel Insurance
  • Legal Advice
  • Real Estate
  • Foreign Exchange
  • Expatriate Jobs
  • Consultancy

Other Resources

  • Accommodation
  • Banking
  • Education
  • Travel Warnings
  • News and Views
  • Commentary
  • VPN for Expats
  • Voting Overseas
  • Australian Expatriate Links
  • Relocation Checklist

You are here

Home

Foreign Currency Mortgages

Foreign Currency Loans for Expatriates and Offshore Investors

Australian Expatriates and Foreign Residents

At the current time, we do not offer access to foreign currency loans (FCL's) for the purchase of Australian residential or commercial property. We have done so in the past, and they may be appropriate financing structures in the future, but current market conditions are not supportive and the only remaining providers are the Australian banks. The latter means, unless access is available to private banking, that market conditions are quite uncompetitive and in most cases, a direct Australian mortgage is the best financing option..

These loans have been very popular at particular times in the past because they offered significantly lower interest rates than were available in the Australian domestic mortgage market. For expatriates with long-term income streams in another currency, and therefore a "natural hedge", they offered a suitable form of financing - and continue to do so in certain situations.

Because we continue to receive regular enquiries regarding FCL's, and believe it is important that people fully understand the pros and cons associated with this form of financing, we have summarised some of the considerations that should be borne in mind below:

  • Typically, the maximum loan to valuation ratio (LVR) available for an FCL is 70%; this provides a lender with a buffer to protect them in terms of currency volatility. If there are adverse currency movements, and the maximum LVR is exceeded, then borrowers should expect to receive a request from the lender to make additional capital payments. This is akin to a margin call, and when individuals are discussing this form of financing with a lender, you should very carefully discuss the circumstances in which a bank may make a request for an additional capital payment. The past few years have been marked with relatively extreme exchange rate movements, there is no sign that this will necessarily diminish.
  • Bear in mind that most, if not all these facilities, will only provide access to a variable interest rate mortgage – fixed rate mortgages are not available. Therefore, unlike in Australian domestic mortgage, you do not have the option of fixing your forward financing costs with any certainty. We would always suggest that you obtain details of current Australian mortgages - variable and fixed - for comparative purposes before committing to an FCL.
  • Given the existence of a foreign exchange risk, you need to consider whether the interest rate differential available between the FCL and Australian mortgage interest rates is sufficient to warrant that risk. Currently, with Australian interest rates at historic lows, we believe that the margin is currently inadequate on its own to support this type of loan. However, if you are an expatriate paid in an overseas currency, then it may make sense to match currency of your income and expense, quite apart from interest rate savings.
  • Prior to the GFC, it was common to see lenders make available what were called multi currency loans - you could in effect borrow in one currency, and then swap within a range of other currencies and there was no requirement that you and a matching income in the currency of the borrowing. This was one example of "market exuberance" which disappeared, and now lenders limit themselves to lending in either the currency of the asset or the income of the borrower.
  • In the past, it has also been common for lenders, particularly the Australian banks, to require borrowers to refinance into AUD at the time they returned to being resident in Australia. This requirement has largely disappeared, but borrowers need to appreciate that they may be required to pay withholding tax in Australia on the interest component of their loan – in effect because the payment will be made to an offshore entity. If you have no matching foreign currency income, retaining a loan of this nature represents a clear foreign currency risk, and you should seek advice around continuance. Should you opt for continuance, also ensure that you do not arrange automatic mortgage payments from your Australian bank account, otherwise you will almost certainly be paying your Australian bank an additional 2 - 2.5% because of poor/standard exchange rates. You should investigate arranging payments through OFX or another dedicated foreign exchange company, both the exchange rate should be better, and fees lower.

Australian Residents

Australian residents should note that it is typically impossible for them to access a foreign currency loan to finance or refinance an Australian property purchase, except in very unique circumstances. The only source of funding would be the Australian banks and they are, quite understandably, not in favour of extending this sort of financing to Australian residents unless they perhaps have access to very substantial income streams, or liquid offshore assets available as security, in the currency of the loan. We cannot provide any assistance in this matter, and Australian residents wishing to explore this option in more detail will need to approach the Australian bank, and probably the private banking function, for a response.

However, Australian residents should note that it is possible to arrange financing for the purchase of overseas property in a number of situations, such as in France, Spain, Italy and the UK - and in the United States. In these situations the minimum loan size will differ by country and the type of property you are seeking to buy - but you should expect to contribute at least a 30% deposit on any purchase and be in a strong financial position.

 

Complete the Inquiry form

IMPORTANT: The material contained in this website and other associated communications is only intended as general, background information and must not be relied upon. No warranty is provided in relation to any material or to the services that may be contracted through exfin.com. It is recommended that individuals seek the advice of qualified professionals before taking any action.

Exchange Rates

AUD/USD » 0.7529
AUD/EUR » 0.6116
AUD/GBP » 0.5375
AUD/YEN » 80.8103
AUD/HKD » 5.8753
AUD/SGD » 0.9872

Proudly supplied by

OFX!

International Time

   
* DST active. icon-alert

Exfin World Clock Notice

Please note we've made every effort to ensure the accuracy of our global clock, but due to unannounced changes in DST please do not rely upon it if precision is vital.

Pension Transfers

Pension Transfers

Click to find out more
  • Home
  • About the Company
  • Legal
  • Privacy
  • Site Map
  • Contact Us
Copyright © 2018 Exfin International Pty Ltd
Pixel Ink Media Web Development