We are constantly bombarded by news headlines and myths that spread like wildfire when it comes to borrowing as an Australian expat. Whether you’re seeking to buy your future home, purchase your first investment property or access ‘lazy equity’ to expand your property portfolio, there are many options available to you. In this week’s article, we’re outlining the key loan types that are still available to you as an Aussie expat.
There is no doubt that accessing capital from the Australian banks has become more difficult over the past 18 – 24 months as an Aussie expat, but it is certainly far from impossible, and most lending options are still available for expats. One of the key factors that lenders are now looking very closely at is serviceability of the loan. This means a close examination of your cash flow including your salary as well as your household expenses. Given that they are looking to approve you for up to a 30 year loan, they are going to assess your situation under a tax rate in Australia as they need to factor in the possibility of you living and working in the land down under again in future. You can find out more about the serviceability and how lenders will assess your cash flow in our previous article here.
Let’s look at the loan types 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.
As you can see, there are many types of property loans that are still available to Australian expats living and working across the globe. This can allow you to make the most of your time offshore by starting off or expanding your property investment portfolio. Feel free to reach out to our team of experienced Australian expat mortgage brokers today to discuss the loan type that would be most suitable for you to achieve your financial goals.
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.