Aussie expats, here’s some good news! You can apply for a home loan while living overseas — and yes, you can even refinance existing loans. While securing a loan from abroad can be challenging due to stricter approval criteria, several banks and non-bank lenders offer expat loans tailored to your unique situation.
What is an Expat Loan?
An expat loan is a type of home loan designed specifically for Australian citizens or permanent residents who are living and working overseas. These loans are available for various purposes, including:
-
Purchasing property in Australia
-
Refinancing existing loans
-
Investing in real estate
While the application process for an expat loan is similar to that of a regular home loan, it often comes with additional and more stringent requirements due to the perceived risk of lending to someone living abroad. Expat loans typically carry higher interest rates compared to standard home loans.
Expat Loan Application Process
To apply for an expat loan, expect to meet specific requirements:
-
Deposit Requirements: Usually, you’ll need a minimum deposit of 10% of the property’s purchase price. Most lenders prefer this deposit to come from genuine savings, but some may accept other sources, such as equity from an existing Australian property or a larger deposit.
-
Additional Costs: Apart from the deposit, you’ll need to account for extra costs such as stamp duty, legal fees, and lenders mortgage insurance (LMI). These costs can add up, so it’s essential to budget for them.
-
Assessment Rates: Some lenders may use Australian tax rates for assessing your financial capability instead of those in the country you reside in, which could impact your borrowing capacity.
Expat Loan Eligibility Criteria
To qualify for an expat loan, you must be an Australian citizen or permanent resident living and working overseas. Lenders generally require:
-
Good credit history: Your credit score will be assessed, just like with a regular home loan.
-
Stable income: Proof of income and employment will be necessary to confirm your ability to repay the loan.
However, eligibility can vary significantly depending on the lender. Some lenders may have more specific requirements, such as:
-
Lending only to expats in countries with an Australian consulate.
-
Lending only to expats earning certain foreign currencies.
Loan-to-Value Ratio (LVR) for Expats
The LVR for expats is often lower than for residents living in Australia. For example:
-
Aussies living in Australia may be eligible for a 80% LVR.
-
Aussies living in London, however, might only qualify for a 60% LVR, even for the same property.
This means that if you’re living abroad, you may need a larger deposit to secure the same loan amount.
Additional Fees for Expat Loans
Expat loans may come with extra costs, including:
-
Application fees
-
Establishment fees
-
Annual fees
It’s important to factor in these additional expenses when considering an expat loan, as they can increase the overall cost of your mortgage.
Things to Consider When Applying for an Expat Loan
1. Limited Lender Options
Since expat loans are more niche products, there are fewer lenders offering them compared to standard home loans. However, with sufficient research, you can find the right lender to meet your needs and make the application process as smooth as possible.
2. Currency Fluctuations
Living abroad means your income is likely paid in a foreign currency. Exchange rate fluctuations can impact your borrowing ability. A weaker foreign currency relative to the Australian dollar could reduce the amount you’re eligible to borrow. It’s crucial to monitor these fluctuations and consider their impact on your financial situation.
3. Power of Attorney (POA)
Many lenders may require a Power of Attorney (POA) to complete the loan application. A POA allows a solicitor or someone you trust to sign documents on your behalf. This is particularly useful if you’re unable to be physically present during parts of the loan process.
How to Apply for an Expat Loan
The process for applying for an expat loan is straightforward but requires careful documentation. Ensure you:
-
Have your income proof ready, including foreign payslips and tax returns.
-
Understand the deposit requirements and additional costs such as LMI and legal fees.
-
Research various lenders to find the one that offers the best terms for your situation.
