Expat & Non-Resident Home Loans

Lenders discount foreign income to allow for exchange rate movement, and they apply foreign tax rates rather than Australian ones. The result is that a salary which looks generous converts into a smaller assessable figure than borrowers expect.

• Most lenders apply a shading to converted foreign income, and the discount varies by lender and by currency.
• Many maintain an accepted currency list. Major currencies are treated more favourably, and some currencies are not accepted at all.
• Foreign tax is applied at the rate of the country you are taxed in, which materially changes net assessable income in low-tax and high-tax jurisdictions alike.
• Allowances such as housing, schooling and hardship components are often excluded or shaded harder than base salary.
• Bonuses and commissions usually need a two-year history to be counted, and are shaded again.
• Self-employed foreign income is harder still, and the panel narrows considerably.

Because the shading differs so much between lenders, capacity figures for the same borrower can vary widely. This is a category where the choice of lender is worth more than the choice of rate.

Foreign persons generally need approval from the Foreign Investment Review Board before acquiring Australian residential property, and the rules differ by property type and by the buyer’s status. Application fees apply and they are not small.

• Australian citizens are not foreign persons, wherever they live, and do not need FIRB approval.
• Permanent residents are generally not treated as foreign persons for residential purchases.
• Non-residents are usually restricted to new dwellings or vacant land for development rather than established homes.
• Temporary residents may be able to purchase one established dwelling as their principal place of residence, subject to conditions, including selling it when they leave.
• Restrictions on foreign purchases of established dwellings have been tightened at various points and are subject to change.

Foreign person

The status that triggers the approval requirement. Australian citizens are not foreign persons wherever they live, and permanent residents are generally not treated as such for residential purchases.

Established dwelling

An existing home that has been lived in. The category most restricted for non-residents, and the one temporary residents may access only under conditions.

New dwelling

A property not previously sold as a dwelling or occupied. Generally the category open to non-resident buyers.

Foreign purchaser duty surcharge

An additional stamp duty imposed by several states on acquisition by a foreign buyer. A state tax, not a lender charge.

Absentee owner surcharge

An additional land tax charged annually by several states where the owner is foreign or absent. It recurs, unlike duty.

Income shading

The discount a lender applies to converted foreign income before assessing it, to allow for exchange rate movement.

On top of the lending terms, several states apply a foreign purchaser duty surcharge and an absentee or foreign owner land tax surcharge. These are state taxes rather than lender charges, and they can be a significant part of the total cost. Confirm them with a solicitor and the relevant state revenue office before you sign.

Allow more time than a domestic file. Certification, translation and time zones each add days, and a document that would take an afternoon in Melbourne can take a week from abroad.

Foreign payslips

3–6 months

Foreign tax returns

1–2 years

Translations

Accredited only

Witnessing

Notary or consular

Certification

Certified copies

Deposit source

Evidenced in full

Lenders accept overseas execution of loan documents, but the witnessing requirements are stricter and vary between lenders.

1. 01Most lenders require documents to be witnessed by an Australian consular official, a notary public, or a person in a defined list of professions.
2. 02Some require identification to be verified in person by an approved agent in your country.
3. 03Original documents often have to be couriered, so factor in the postage time on both legs.
4. 04A power of attorney granted to someone in Australia can simplify settlement, and it must be drafted to the lender’s requirements. Take Australian legal advice before granting one.
5. 05Your conveyancer or solicitor should be appointed early, since electronic settlement still requires an Australian representative.

Cross-border property ownership raises tax questions in both countries, and they are consequential. Australian tax residency, withholding on rental income, the treatment of a main residence for foreign residents, and clearance certificates on sale all have real financial effects.

These are matters for a registered tax agent with cross-border experience, and often for an adviser in your country of residence as well. We will not guess at them, and we would rather tell you to get advice than watch a purchase create a problem that shows up years later at sale.

1. 01

   Confirm your category

   Citizen, permanent resident, temporary resident or foreign national. Everything else follows from this.

2. 02

   Check FIRB and state surcharges

   Before you look at property. Approval requirements, fees and duty surcharges change the budget materially.

3. 03

   Establish assessable income

   We apply each lender’s shading and foreign tax treatment to your actual package, so you get a realistic capacity rather than a converted salary figure.

4. 04

   Assemble and certify documents

   Payslips, tax documents, statements, translations and certifications. Start this early. It is the longest part of the file.

5. 05

   Application and assessment

   Lodged with a lender whose policy accepts your residency, currency and property type. Expect a longer assessment than a domestic file.

6. 06

   Approval, execution and settlement

   Documents witnessed to the lender’s requirements, couriered, and settlement coordinated with your Australian conveyancer.