This article will explore how you can obtain an Australian mortgage whilst you are living in the UK. Perhaps you are an Australian expat, married to a foreign national or a non-resident looking to invest in Australian property.
This article will discuss the implications of GBP foreign income you generate and the impact on your Australian mortgage. This can be employee income or self-employed and the restrictions around the types of loan available and how COVID has impacted the mortgage application process.
Getting a home loan using GBP income as an Australian expat
Australian expats who earn GBP income are considered a gold standard currency. From a lending perspective, they look upon this type of currency as reliable, safe and are more open to lending against this currency.
For Australian expats that have been outside of the country for some time, it is important to ensure you have a credit score in Australia, this is a relatively new scoring system and will have an impact on your mortgage application process.
Employee income or being employed by a British based employer is preferable to Australian lenders. Generally, the process is lenders will take your base GBP wage, convert to AUD and take 80-100% of the Gross wage for servicing.
Aside from base wage, some lenders are happy to accept allowances, commissions and bonus payments paid in GBP and then converted to AUD. Lenders would like to see a copy of your employment contract to verify the base wage and other benefits paid as well as recent payslips.
Lenders will generally take 80%-100% of the converted amount for servicing, this will vary between lender credit policy.
Self Employed Income
Self-employed income is accepted, though many lenders on our panel will deem this type of income as unacceptable. For the lenders that will accept this type of income, they will want to verify against the last 2 years financial statements and tax returns and an accountants letter. This type of income would be more suited to established businesses and not startups.
The lenders will take the net income and again convert to AUD and take 80-90% of the income for servicing, though these lenders will reduce the LVR and require the borrower to contribute 30-35% towards the purchase price.
Purchasing an Australian investment property
Lenders will allow you to borrow 70% – 90% of the property value (depending on the lender). At the time of the application, the lender will want to ensure you have sufficient funds to close on the property and pay for the settlement costs.
If you have an existing property in Australia, some lenders will be happy to access the equity to use towards the deposit of the new purchase.
For servicing, the lender will also apply a nominal rental figure on the proposed investment property and this will also be verified with a bank valuation.
Refinancing Australian Investment Home Loan
Perhaps it is time to review an existing home loan in place, change the loan features (adding an offset account) or changing the type of loan from a variable loan to a fixed loan. This is part of the process and we can tailor our recommendations based on your financial goals with the loan and property. Recently the RBA has cut the official cash rate to 0.10% – which is an ideal time to review your mortgage, to secure a lower interest rate.
If you are looking to purchase a property in the GBP, lenders will also allow the release of equity against your Australian property to use as a deposit. Keep in mind the lender will need to factor in the GBP mortgage repayments, to ensure you can service both borrowings.
Things to consider with servicing
Aside from your employment income and the rental income from your proposed Australian property. It is important to review your living expenses (how many dependents), your overseas rental expense and repayments of existing liabilities (including Australian and US mortgages, credit card limits, car and other loans).
My partner is a foreign national
If you need your partner on the loan servicing purposes, some lenders will treat your partner under expat policy (if you are in a defacto/married relationship).
This means provided there is a benefit for them to be on the loan, their GBP income can be used for servicing. It is important to understand the FIRB requirements and local state stamp duty laws.
Getting a home loan using GBP income as a non-resident
If you are a non-resident or foreign national, you can invest in Australian property and obtain an Australian loan to finance. It is important to understand your FIRB requirements around investing as a foreign national. Depending on the state you wish to purchase property in, there is potentially additional stamp duty surcharge to consider.
Most lenders deem this type of transaction unacceptable. Which means the current lenders allow for a maximum of 60% – 70% borrowing for the purchase. Not only do foreign nationals require a larger down payment, but this type of lending will also incur higher fees and charges.
Employee income or being employed for a British based employer is the most favourable for Australian lenders. Generally, the process is lenders will take your base GBP wage, convert to AUD and take 80-100% of the gross wage for servicing.
Aside from base wage, some lenders are happy to accept allowances, commissions and bonus payments (though this would need to be paid for the last 2 years) converted from GBP to AUD. Lenders would like to see a copy of your employment contract to verify the base wage and other benefits paid.
Lenders will generally take 80-100% of the converted amount for servicing.
Self Employed Income
Self-employed income is accepted, though many lenders on our panel will deem this type of income as unacceptable. For the lenders that will accept this type of income, they will want to verify against the last 2 years financial statements and tax returns and accompanied by an accountants letter. This type of income would be more suited to established businesses and not startups.
The lenders will take the net income and again convert from GBP to AUD and take 80-90% of the income for servicing.
Consideration needs to be given with FX fluctuations when you are earning GBP income and require AUD to repay the Australian mortgage.
This will require the currency to be moved from the UK to Australia to meet your financial commitments. As you can see the volatile currency and impact on the repayment amount. This risk will need to be planned for and considered as part of the transaction.
It is important to discuss the different types of mortgage features, that can assist with your FX currency.
COVID-19 and impacts on your Australian Expat mortgage
As you would be aware, COVID-19 has had a huge impact on the UK business and employment market. Australian lenders are asking questions and making inquiries to see how the borrowers have been impacted.
Borrowers, who are on a wage, the Australian lenders are interested to know if there has been any changes to your employment, loss of working hours, loss of bonus income or loss of job?
Borrowers who are self-employed, the Australian lenders will need to understand how COVID-19 has impacted their trading. Has business stopped, has the business been able to recover trading to pre-COVID levels and how will it be impacted in the future.