Australian Expats Working abroad: How to Buy Property in Australia

Home or Investment Loans for Australian Citizens Living and Working Overseas

If you're an Australian expat working abroad and looking to purchase property in Australia, there are a few key points you need to know about securing a loan. Here’s a guide to help you understand the process.

How Much Can I Borrow?

The amount you can borrow is based on your overseas income, which will be converted to AUD. Depending on the bank, the amount of overseas income considered can range from 60% to 100% of the equivalent AUD income. Keep in mind that a few banks may use 100% of your gross income in AUD, but this policy is subject to change and depends on the bank's accepted currencies.

Important points to note:

• Most lenders do not accept self-employed overseas income for loan servicing.
• A select few lenders will consider self-employed income from overseas.
• Rental income is generally serviced at 80% of the gross rental income.

Key Points for Expat Loans

• Maximum Loan-to-Value Ratio (LVR): The maximum LVR is typically 80%, with CBD apartments potentially limited to 60% LVR.
• Loan Amounts: Each bank has slightly different maximum borrowing capacities for expat loans, and your LVR will impact your borrowing capacity.
• Interest Rates: Some lenders may charge slightly higher interest rates for expat loans.
• Accepted Overseas Currencies: Lenders generally accept incomes in GBP, HKD, NZD, SGD, USD, CAD, JPY, and CHF. Some currencies may not be acceptable.
• Eligibility: Loans are available for Australian citizens and permanent residents. Expats can buy both residential and commercial properties in Australia.
• Refinancing: Yes, you can refinance your existing loan or consolidate loans with a new lender offering a better interest rate.

Evidence of Ability to Reside and Work in a Foreign Country

If you're earning foreign income, you'll need to provide proof of your ability to reside and work in the country where the income is being earned. The required documents depend on your citizenship status:

• If you do not hold dual citizenship with the foreign country:
  • Australian passport
  • Work permit/work visa with a minimum of 4 months remaining
• If you hold dual citizenship with the foreign country:
  • Australian passport
  • Foreign passport from the country where income is earned

Lender’s Translation Checklist

For all documents in a foreign language, you must provide an English translation prepared by an accredited translator. The translated documents must be stamped with the translator’s NAATI stamp.

How to Purchase Property While Living Overseas

Purchasing property in Australia while living abroad requires careful planning and understanding of the financial and legal aspects. Here’s a guide to help you navigate the process:

1. Application Structure and Credit Assessment

When applying for a loan to purchase property in Australia, lenders will conduct a full credit assessment based on your income, assets, expenses, and liabilities. For those living overseas, you’ll need to convert your foreign financial information into Australian Dollars (AUD) to determine your loan servicing capacity.

2. Overseas Expenses

Lenders will consider your overseas living expenses, which may include:

• Rent payments
• Overseas credit card debt
• Car loans or personal loans
• Day-to-day living expenses for yourself and your family (e.g., private school fees, monthly living costs, health insurance, and travel expenses).

These expenses will be factored into your ability to repay the loan, so it's important to provide accurate details of your financial commitments.

3. Deposit Requirements

For Australian expats, a typical deposit requirement ranges from 20% to 30% of the property’s purchase price. While some lenders may accept a 10% deposit, having a larger deposit gives you access to a broader range of lenders and may result in better loan terms. Your deposit can be a combination of cash savings or equity in any existing Australian property you own.

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How to Purchase a Future Owner-Occupied Property While Overseas

If you plan to purchase a property with the intention of living in it once you return to Australia, the process will differ slightly:

1. Purchasing as an Investment Property Initially

If you're living overseas, banks will assume that you won't occupy the property immediately and will treat the purchase as an investment property. This means that the property will be assessed based on investment lending criteria, and you will need to demonstrate your ability to service the loan using foreign income.

There are, however, exceptions to this rule, so it’s worth checking with your lender to see if they offer any flexibility.

2. Changing the Loan Purpose Once You Move Back

When you return to Australia and begin living in the property, you can inform the bank that you now occupy the property. This can typically be done by providing proof of residence, such as:

• Your driver’s license with the property address
• Utility bills (e.g., phone or electricity bills)

Once the bank is satisfied that the property is your primary residence, they can adjust the loan from "investment" to "owner-occupied." This will likely reduce your interest rate and improve the overall terms of your home loan.

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Conclusion

Purchasing property in Australia while living overseas is entirely feasible, but it requires navigating both local and foreign financial considerations. Understanding how lenders assess foreign income, managing overseas expenses, and knowing how to transition an investment property into an owner-occupied home are key steps in the process. Be sure to consult with lenders and financial advisors who specialize in working with Australian expats to ensure you are fully prepared.

How to Purchase Property with Your Spouse Who is Not an Australian Citizen

A common challenge faced by Australian expats—Australians living abroad with a non-citizen spouse—is purchasing property together in Australia. As an Australian expat, you are considered an Australian citizen if you hold an Australian passport, regardless of your tax residency status.

However, when purchasing property with a non-citizen spouse, there are several important considerations to be aware of:

1. Foreign Investment Review Board (FIRB) Approval
   At the federal level, the first step is to determine whether your non-citizen spouse is classified as a "foreign person" under the regulations of the Foreign Investment Review Board (FIRB). FIRB approval may be required for the non-citizen to purchase property in Australia.

2. State-Based Rules and Additional Surcharges
   Each state in Australia has its own rules regarding property purchases by foreign nationals. This includes varying definitions of who qualifies as a "foreign person," as well as additional taxes or surcharges for foreign buyers. It’s essential to review the specific regulations in the state where you plan to purchase the property.

3. Additional Stamp Duty
   If your non-citizen spouse is classified as a foreign person under FIRB guidelines, their portion of the property ownership may be subject to an additional stamp duty surcharge. This surcharge can range from 7-8% on top of the regular stamp duty, depending on the state in which the property is located.

In summary, when buying property in Australia with a non-citizen spouse, it’s crucial to seek guidance from FIRB and understand both federal and state-based requirements to avoid unexpected costs and ensure compliance.

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Questions?

We can talk using Whatsapp, Team meets or Zoom

Simon Bowler

Dip, FSMB & Fin
Mortgage Choice in Northcote