Australian Expats Mortgage

Are you an Australian Citizen living overseas?

Did you know that Aussie Expats are able to apply for a mortgage in Australia?

Australians living in the UKTraditionally, this has never been a simple process, and can be downright confusing due to lenders policy restrictions such as: document translation issues, verifying employment and work history, type of deposit saved and your foreign credit history – just to name a few!

No wonder Australian expats are often confused when it comes to finding a mortgage in Australia! However thanks to specialised Mortgage Brokers such as The Home Loan Experts, obtaining a home loan for Australians living offshore has never been easier. You can find out more about Australian Expat Mortgages on their website.

How much can I borrow?

If you are an Australian expat living and working abroad you may have been told by financial institutions that your loan amount will be limited to 80% of the property value. This is quite simply – not true!

If you apply with a lender that regularly works with non-residents, then you may actually be able to borrow up to 95% of the property value. This means that you will not have to exhaust your existing capital, and you can receive substantial tax benefits due to negative gearing.

In addition to this, some lenders will give you the same discounted interest rates as if you still were living in Australia!

How can I prove what I earn?

If you live in a country such as the United Kingdom (UK), Ireland, Europe, United States of America (USA), Dubai, Canada, Singapore, New Zealand, South East Asia and China we can verify your income in a various number of ways. Other countries are assessed on a case by case basis, with lenders favouring countries with joint tax agreements with the Australian Government.

If your tax returns and pay slips are in English, then these will be accepted in Australia. If they are in a foreign language, the documents may need to be translated by the consulate in your country – however, many lenders have credit assessors who have translators in-house, so this may not be a concern.

Some lenders will even consider accepting a letter from your employer as confirmation of your employment!
As you can see, every lender looks at your documents and application in a completely different way, this is why it is so important that you choose a lender that has requirements to match your situation. This way you will avoid unnecessary delays in getting your mortgage approved.

The most common mistake people make is to just apply with a bank without knowing their policy for non-resident borrowers.

Can the bank take foreign property as security?

No, Australian lenders will only take Australian properties as security. If you have a property in Australia or are buying a property in Australia then this is not a problem.

However, if you are trying to apply for a loan to buy a property in another country and you are using that property as security for the mortgage, then it is best to apply for your loan in that country. You can apply for an Australian loan to release equity from your Australian property to be used as your deposit for a foreign property.

What do I do from here?

Australian Expats living miles from home are of the assumption that it is a painful process applying for a home loan in Australia. However thanks to advances in technology, it is now easy to apply for your mortgage from a foreign country.

A specialist mortgage broker such as The Home Loan Experts will be able to assist you with your entire home loan application, from start to finish, with minimal hassle. Please refer to their Australian Expatriates page for more information.

Calculating your equity

Equity scaleHow much equity do you have? Your home could be a hidden gold mine of equity, ready to be turned into cash for you to spend! The amount of equity you have really depends on the the value of your home & how much you owe to the bank. The difference is your equity.

Calculating your equity

Don’t worry it is easier than it looks! The formula is:

House value – Loan amount = Equity

So lets say that your home is worth $500,000 and you owe the bank $300,000 then the formula looks like this:

$500,000 – $300,000 = $200,000 in Equity

As a general rule if you draw down on equity such that you owe over 80% of the value of your home, then you may need to pay Lenders Mortgage Insurance (see below). Many home equity loans are restricted to be a maximum of 90% of the property value.

The difficult bit…

The difficult part is working out just how much your house is really worth. Real Estate Agents often give you an overinflated estimate of the value of your home. This is because then it is more likely that you may ask them to list the property for sale through them. There is so much media hype about prices going up and down it it actually quite hard to find out an accurate measure for the value for your home.

If you would like to know more about working out the value of your home for yourself then read this article on how to value a property.

Lenders Mortgage Insurance (LMI)

Lenders Mortgage Insurance is insurance that protects the lender in the event that you can’t repay your home loan. Lenders take out this insurance if your equity loan is for more than 80% LTV. The LMI premium charged is paid by you, the borrower, not the lender!

This can end up to be much more expensive than people think! If you are thinking of accessing your equity then use this Lenders Mortgage Insurance calculator to find out what your premium will be. Make sure you shop around! Different banks have different premiums, and they only rarely tell the general public what they are.

Equity Loan Policy

Have you got the best possible interest rate on your equity loan? That’s great, but it isn’t going to do you any good if your application is declined! Before you apply for a loan, take the time to learn what the banks are looking for and present your application to the right lender in the right way.

Firstly, many banks simply are not interest in equity loans. They don’t have the appetite for this type of business. In particular many lenders do not like to consolidate multiple unsecured debts. They know from past experience that this type of application is a much higher risk, and so typically if there are more than three debts being rolled into one then they will decline the application.

There are specialist lenders that actively seek people who are consolidating debt. Typically they will want their borrowers to have a lower LTV ratio (also known as the LVR). Ideally your loan should have an LVR of less than 80%, that means that your mortgage is no more than 80% of the valuation of your house. The better your repayment history then the better your rate & the better your chances of approval. You must have real estate that you own as security for an equity loan.

The loan purpose is the other main area that catches people out. What are you releasing the money for? Did you know that each lender has their own opinion as to what is a low risk loan purpose & what is a high risk? As a general rule the higher risk loans types are for consolidating tax debt, going on holidays, “unknown or undisclosed” purposes or business ventures. Low risks are refinancing to get a better interest rate, investing in shares and buying an investment property.

There are a range of other lender guidelines that can catch you out if you aren’t careful. Most lenders have guidelines requiring the following:

  • Minimum time in your job, usually six months.
  • Minimum asset position, usually dependent on your age.
  • Minimum serviceability ratio, you must be able to afford the loan even if rates increase.
  • Minimum credit history / credit score.
  • Acceptable security as collateral for the loan.

Use the advice of a good mortgage broker such as Dargan Financial to help you choose a lender that you qualify with and to negotiate the lowest interest rate for your equity mortgage. Navigating the minefield of bank policies is impossible for someone who is outside of the industry, it is essential that you seek professional advice.