Australians who borrow to fund property purchases have had to come to terms with plenty of changes. During the second half of 2015 The Reserve Bank, the Australian Securities & Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) are all driving changes that have impacted Australian borrowers, whether they are domiciled in Australia or overseas.
For Australian Citizens living overseas, this adds an increased layer of complexity to refinancing current Australian debt or purchasing property in Australia.
What could these changes mean to you?
- Investment lending may be harder to get.
- Refinancing and/or additional lending may not be possible.
- Assessment of borrowing capacity is more stringent.
- Costs, income, living expenses and rental returns are more conservatively assessed by lenders.
- Higher deposits than previously necessary may be required.
- Interest Only and Principal and Interest Loan terms are viewed differently, as are Investor and Owner Occupier purpose loans.
In addition to implementing the various rules, Australian lenders have added additional hurdles to potential Expatriate borrowers, for example:
- How much will I be able to borrow?
As a general rule you can borrow up to 80% of the value of the property. There may be situations where you can borrow a higher percentage and also situations where you are limited to a lower percentage, but the majority of applicants opt for an 80% loan.
- Is the currency you earn recognised by the lender?
Here is a list of the main currencies banks accept:
Tier 1 currencies:
- US Dollar (USD).
- Great Britain Pounds Sterling (GBP).
- Singapore Dollar (SGD).
- Canadian Dollar (CAD).
- Hong Kong Dollar (HKD).
- Japanese Yen (JPY).
- Swiss Franc (CHF).
- New Zealand Dollar (NZD).
- Chinese Renminbi (CNY).
Tier 2 Currencies:
- Indian Rupee (INR).
- Indonesian Rupiah (IDR).
- Vietnamese Dong (VND).
- Mexican Peso (MXN).
- Swedish Krona (SEK).
- Russian Ruble (RUB).
- Norwegian Krone (NOK).
- Turkish Lira (TRY).
- South Korean Won (KRW).
- South African Rand (ZAR).
- Brazilian Real (BRL).
- United Arab Emirates Dirham (AED).
- How will my currency affect how much I can borrow?
Is the currency you earn a Tier 1 or Tier 2 currency? Each lender is different but most will assess Tier 1 currencies at 80% and Tier 2 at 70% of the amount you earn
- Will the property I am purchasing affect how much I can borrow?
Potentially yes, some banks will loan a higher percentage against existing properties to Off the Plan properties.
- What evidence do I need to provide to satisfy the lender of my income?
Generally you will need the following items:
- Letter from your employer confirming your income or a copy of your employment contract
- Your most recent two pay slips
- Copy of the bank statement your pay is being deposited it
- Copy of the visa or local passport to confirm you are eligible to work
- Will the lender charge me more because I am an Expat?
Generally no, some lenders may not discount as much as they do for an onshore loan, but as a general rule they will not increase their fees above the advertised rates.
- Is the lender equipped to process my application quickly and efficiently?
Not all lenders will recognise foreign income, of the ones that do, most are fairly used to processing off shore applications. Like everything, there are some that do it better than others though!
- What requirements does the lender have to execute my loan documents?
To execute (sign) your loan documents you will need to have your signature witnessed by:
- An official public notoriety
- An official of the Australian Consular