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Wednesday, October 15, 2014

Expatriate Australian Home Loans: How To Get Mortgage Approval While Living Overseas!

Did you know that expat Aussies can still qualify for an Australian home loan? The secret to approval is to apply with a bank that has credit policies that are favourable for non-resident borrowers.

So what are qualifying criteria for Aussie expats? As a general rule most banks and building societies do not accept loans from non-residents. This is because they either do not have systems to stay in contact with and manage loans for persons who are overseas, or because they are not comfortable with the additional risk associated with this type of mortgage. The banking sector has never been known for being easy to deal with!

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The lenders that do accept non-resident home loans, tend to have additional credit criteria, and require additional documents before approving your loan.

You can borrow up to 90% of the value of your property in Australia. 95% LVR is available on a case by case basis. If you are not an Australian Citizen or Permanent Resident then you can borrow up to 80% of the property value. Purchasing a property or refinancing a current loan are both acceptable loan purposes. Only Australian property / real estate can be used as security for the loan. You must be able to afford the loan comfortably. This is known as having strong serviceability, ideally 1.1x cover. The lender may only use 80% of your income in their assessment of your borrowing capacity to allow for exchange rate fluctuations Your credit history in Australia must be clear of defaults & other adverse credit listings. Foreign Investment Review Board (FIRB) approval is not required for Australian Citizens and PR holders, regardless of if you are a foreign resident for tax purposes or not.

Expatriate Australian Citizens often find that the most difficult part of applying for their loan is to provide the supporting documents required for approval. In many cases the lender may require JP certified ID or may ask you to take your ID to the nearest Australian consulate. This requirement varies between lenders.

If you are in a country that does not use English as their primary language then there can be additional challenges, in that the bank may not be able to understand your tax returns or payslips! Thankfully, some lenders have a specialist non-resident credit department that is staffed with multi-lingual credit managers.

Other banks have streamlined application processes for non-residents, and will only require a letter from your employer as evidence of your income if you are borrowing up to 80% of the property value.

If your income is received in a foreign currency then you may like to consider borrowing in that currency, to reduce the risk of exchange rate fluctuations. Some Australian lenders will allow foreign currency home loans in GBP, SGD, USD, HKD, JPY or CNY. The vast majority of people seeking foreign currency home loans are expat Australians living in England (UK), the United States of America (USA) or Singapore.

However, foreign currency loans carry some additional risk that are not present if you borrow in Australian Dollars. If the exchange rates move significantly then the bank may decide that your loan is no longer adequately secured by your real estate in Australia. They may request that you provide additional funds to reduce their risk, if you cannot provide more funds then you will be in default.

Choosing a home loan for a foreign resident is quite different to choosing a loan for someone residing in Australia. While professional package discounts are usually preferable for people living in Australia, for those overseas there is little benefit received from the additional loan features. In many cases expats prefer to choose basic loans which are easier to manage and have a competitive interest rate.

There is no point in choosing the best loan on the market if the lender you apply with does not accept applications from expats! The major banks and 2nd tier lenders are usually the best at dealing with Australians living overseas. On the other hand non-bank lenders and building societies rarely deal with these types of applications, and in many cases their lack of experience causes delays. Several even require the hard copy application form to be mailed to them for verification purposes!

The secret to getting approval quickly is to apply with a specialist non-resident mortgage broker. They can complete a quick assessment of your situation including which documents you can provide, which country you are in and which specific loan features you need. With this information they can then create a short list of lenders and loan products for you to choose from. Having someone in Australia that can deal with the banks for you can turn a complicated process into a few simple phone calls & emails.

When choosing a mortgage broker ensure that they have an Australian Credit Licence (ACL), are a member of the Mortgage & Finance Association of Australia (MFAA) and that they are a member of the Credit Ombudsman Service (COSL). Your broker should assist you from application, and approval through to settlement. If you have any questions about your loan after it has been advanced, or if you are considering fixing your interest rate, then you should ask your mortgage broker for advice.

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