We are often asked by Australian across the globe one very common question – “I’m an Australian expat, can I still get a home loan or investment property loan in Australia..?
With all of the media hype and headlines currently spreading, it’s no wonder there is some confusion about what options are available to Australian expats. We’re here to ensure Australian expats are armed with the appropriate information and to advise that the short answer to this question is “YES, Australian expats can still obtain both home loans and investment property loans in Australia’”
Whether you’re looking at purchasing a property back home in Australia that will start off as an investment property and later become your home when you repatriate, get into the property market by purchasing your first investment property or are looking to tap into the equity in your property portfolio to expand it and purchase another investment property, there are options available. This week we’re dispelling the myths for Australian expats and outlining exactly what options are available.
Before we get into the options available, there is no doubt that borrowing has become more difficult for Australians living overseas from Australian banks, however it is a far cry from being impossible. It’s important to first note that Australian expats can still borrow 80% of the value of the property in Australia, just as they could as an Australian resident, and that the rates are also competitive. There is very rarely a premium applied to the interest rate just because you live abroad.
One of the key factors that Australian banks and lenders are looking closely at is the serviceability of the loan. Simply put, this means that they’re closely examining your income, any discretionary bonuses and allowances that are paid, and your regular expenses. As they are looking to provide you with a formal approval for up to a 30 year loan in Australia, they may also opt to determine your serviceability under an Australian tax rate, however this is not across all lenders as some will take your net income if you’re paying tax abroad. Check out more about serviceability and your borrowing capacity in our article here.
First, we’ll explore the types of loans that are available to Australian Expats
- Standard Variable Rate Investment Loans
A common type of loan for both property investors and home owners, the standard variable rate loan means that your interest rate will rise and fall based on market rates and economic conditions. These types of loans typically allow for extra repayments, allow for a great level of flexibility, offset accounts, redraw facilities and avoid any early repayment or refinancing penalties. All of these features are also typically available to Australian expats living and working across the globe.
- Fixed Rate Investment Loans
Fixed rate loans have been quite popular, particularly amongst our clients, over the past 2 years with the expectation that interest rates in Australia are at or at least are close to the bottom of the rate cycle. This means that the interest rate will not change for a fixed period of time, which can generally be locked in for anywhere between 1 – 10 years. Once this fixed rate period expires, you can then consider fixing the rate again or allowing your loan to switch to a variable rate loan. Again, Australian expats have access to the same attractive fixed interest rates as Australian residents.
- Split Loans
You may also wish to split your loan into both a fixed and variable rate loan. You may wish to have the benefit of some shelter from any interest rate increases as well as simplifying your budgeting, whilst also allowing for the flexibility of making extra repayments at bonus time or when you have extra cash flow to reduce your mortgage. Again, there are generally very few restrictions, if any, on Australian expats looking to split their loan in this manner.
- Line of Credit / Equity Access Loans
A Line of Credit, otherwise known as an Equity Access Loan, can provide you with access to the existing equity in your property to further expand your property portfolio. For example, you may own a property that has risen in value over the past few years and is now worth $1.5M, and your mortgage is just $400,000. In this case, you may be able to access a further $800,000 to invest in further properties in Australia and expand your portfolio. You can read about a case study with one of our clients here. This is quite a common strategy for many of our clients living offshore who have rented out their previous primary residence and now have significant ‘lazy equity’ in the property that they would like to put to work.
Currently, as an Australian expat, the key difference with these loans is that the equity can not be accessed to be spent on non-investment items such as holidays, investing in other asset classes such as shares or other discretionary expenses. There are still a range of lenders that we work with that can provide equity access loans to allow you, as an Australian expat, to expand your property portfolio.
- Construction Loans
If you are looking to build your own future own, develop a block of land that you currently own or purchase a house and land package as an investment, then as an Australian expat you can still access these loans at the same competitive rates as someone living in Australia. The loan will generally be an interest-only loan during the construction phase of the project and then become a principal and interest loan once this is complete. This type of loan generally works on progress payments, with access to capital becoming available as the construction of your property progresses.
You may quickly realise that the loans available to Australian expats are largely the same as those options available to Australian residents. When assessing your borrowing capacity and what your options are to purchase property back home, it’s important to work with an investment-savvy mortgage broker that understands the expat landscape.
If you’re finding that your current borrowing capacity is insufficient and you think it should be higher, feel that your interest rate is too high, or would simply like to explore if your financing structure is aligned with your financial goals, feel free to book in a complimentary call with our Australian expat team.
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.
Book an obligation-free, complimentary consultation here today.
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.