A common question that we’re asked by many of our Australian expat clients when they’re looking at buying their own home is – “My spouse / partner isn’t Australian, is there anything I need to be aware of if we want to buy the property together..?”
The short answer is yes.
This is exactly what we’re going to explore this week. It’s common for couples to want to buy a property together, which often means that both parties apply for the loan together, and both names are on the title of the property. This can, however, have a significant impact on charges, borrowing capacity and even tax implications going forward, so it’s important to do your home upfront. In this article, we’re highlighting some of the common aspects to consider if you’re looking to purchase a property with your non-Australian spouse.
- Consider which lenders will accept non-Australian citizens
As a first step, it’s important to work with your mortgage broker to shortlist which banks and lenders will actually accept non-Australian citizens or Permanent Residents (PRs). Of the many lenders that we work with, many will not accept non-Australian citizens / PRs, but there are still a range of options that will, and even some that will accept a joint application providing at least one of the applicants is an Australian citizen or PR.
- Consider whether the income of non-Australian citizens can be included
Once you’ve developed your short list of lenders with your mortgage broker, you should then review which of the lenders will accept the income of the non-Australian citizen or PR for serviceability purposes. There are some lenders that will not accept any income for the non-Australian spouse, which effectively treats them as unemployed, and means that the loan must service based on the income of the Australian citizen alone.
There are some lenders that will accept the income of both Australian and non-Australians, again highlighting the importance of reviewing all of your options upfront.
- Consider any foreign buyer surcharges or additional taxes
Stamp duty is a tax that is imposed by the State Governments, and as such does vary between the various states and territories in Australia. Many of the states will impose an additional stamp duty, or surcharge to the standard rate, for the foreign buyer of the property. This could also mean, for example, that if you’re looking to purchase a property in joint names with your foreign spouse as joint tenants, that there could be a surcharge imposed on 50% of the purchase.
In the event that there are foreign buyer surcharges on stamp duty, it’s important to review your ownership options here to minimise this expense. You may decide that structuring the ownership of the property in a different manner, such as a significantly reduced percentage to the non-Australian spouse, thereby minimising the surcharge imposed.
- Consider any foreign buyer land tax surcharges
Land tax is also a tax that is imposed by the State Governments, and in some cases, there will be a surcharge imposed on foreign owners of Australian property. This can be quite a substantial cost, and land tax is a cost that is calculated and due to be paid every year, so it’s important to do your homework here and ensure that you’re not going to be hit with unexpected taxes and surcharges.
- Consider whether a surcharge on the interest rate is applicable
In some cases, lenders will treat the loan application as a non-resident loan, which could incur additional costs or even a surcharge to the interest rate. Here it’s important to review your options and even consider adjusting the ownership of the property. You may decide to simply have the property in the name of the Australian citizen, and have a separate agreement put into place to protect your ‘ownership’. This is certainly an area that you should seek legal advice on.
If you’re considering buying a property with your foreign spouse, it can certainly be done, and we’ve helped a number of our global clients do exactly that. However, it’s vital that you do your homework upfront and ensure that you’re not in for any nasty surprises down the track with unexpected costs or taxes.
LoanSuite Pty Ltd is your lending partner for all of your home loan, investment property, business, and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.
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LoanSuite Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.