As an experienced Australian Expat Mortgage Broker, we understand the unique challenges you face when it comes to obtaining a mortgage. In this blog post, we will share ten actionable tips that will help you enhance your borrowing power in Australia in 2023. By implementing these strategies, you'll be better equipped to achieve your financial goals and secure the home loan you desire.

Tip 1: Improve Your Credit Score

As an expat, your credit score plays a crucial role in determining your borrowing power. Start by obtaining a copy of your credit report and identifying any areas for improvement. Make sure to pay bills and debts on time, keep credit card balances low, and minimise new credit applications. Over time, these steps will positively impact your credit score and increase your borrowing capacity.

It is quite common that many Australian expats may have had a store loan, or a credit card that they’ve simply forgotten about, and as a result, haven’t updated their contact details for. This may mean that this debt has snowballed, and late payments and penalties could apply. It is far better to be aware of, and resolve any issues before seeking to apply for finance.

Tip 2: Reduce Existing Debt

Reducing your existing debt is another effective way to enhance your borrowing power. Lenders assess your debt-to-income ratio to determine your ability to take on additional debt. Consider implementing a debt repayment strategy and focus on paying off high-interest debts first. By reducing your debt burden, you'll demonstrate financial responsibility and improve your chances of securing a larger loan.

This also includes credit card limits, whether you actually owe money on your credit card or not. Typically, a lender will factor in a 3% monthly cost based on the limit of your credit card. If you’re carrying a number of credit cards, with a total limit of A$100,000 for example, this would equate to $3,000 in additional monthly expenses, significantly reducing your borrowing capacity.

Tip 3: Increase Savings and Financial Reserves

Having substantial savings and financial reserves is a strong indicator of your financial stability to lenders. Aim to increase your savings by setting aside a portion of your income regularly. Building a financial safety net not only improves your borrowing power but also provides a buffer for unexpected expenses or changes in circumstances.

This may also mean that instead of borrowing 80%, you may look to reduce your loan to value ratio (LVR) to 70 or 75%. This may also increase the number of lenders that are available to you, and in some cases, allow you to secure a better interest rate.

Tip 4: Minimise Financial Obligations

When assessing your borrowing capacity, lenders consider your existing financial obligations such as personal loans, credit card debt, and other monthly expenses. Review your expenses and identify areas where you can cut back. By minimising your financial obligations, you'll free up more of your income, which can be used to support higher loan repayments.

Items such as clubs and memberships, gyms, subscriptions, and other ongoing discretionary expenses, can all reduce your overall borrowing capacity. By seeking to cancel these upfront, you may find that your borrowing increases quite quickly.

Tip 5: Increase Income and Demonstrate Stability

A higher income and stable employment history significantly impact your borrowing power. Consider ways to increase your income, such as seeking career advancements or exploring additional income streams. When applying for a loan, lenders prefer stable employment history, so try to avoid job-hopping. Demonstrating a consistent income stream and employment stability will enhance your borrowing capacity.

It's important to note that many ‘side-hustles’ won’t be acceptable to most lenders for Australian expats, so it is often your primary income that you should be focused on increasing in the form of bonuses, or pay increases.

Tip 6: Choose the Right Loan Product

Selecting the right loan product is crucial in maximising your borrowing power. As an expat, you may have specific loan options available to you. Consult with an Australian Expat Mortgage Broker to understand the loan products tailored to your needs. They can guide you through options like expat home loans, foreign currency loans, or offset accounts, ensuring you choose the loan that aligns with your financial goals.

This also applies to choosing the right lender. At any one time, there could be 10 – 15 different Australian lenders that will loan to Australian expats, and each may treat foreign income differently. Some will shade at 60 to 80%, some will apply a further foreign currency buffer, some will accept your actual tax rates while others will apply Australian tax rates. All of these differences can result in significant variance in terms of your borrowing power.

Tip 7: Improve Employment History and Stability

Lenders favour borrowers with a stable employment history. If you have recently transitioned to a new job as an expat, providing evidence of your employment stability can enhance your borrowing power. Maintain all relevant documentation, such as employment contracts, pay slips, and tax returns, to demonstrate your reliability as a borrower.

If you are in a similar role, but with a different employer, a good mortgage broker will likely be able to present the consistency of employment, particularly if you have changed due to career progression or increased income.

Tip 8: Seek Professional Advice

Navigating the complex world of borrowing as an expat can be challenging. Seeking advice from an Australian Expat Mortgage Broker can make a significant difference. They possess specialised knowledge and access to a wide range of lenders catering to expat borrowers. A mortgage broker can help you understand the borrowing requirements, guide you through the application process, and negotiate favourable loan terms on your behalf.

Tip 9: Research Lenders and Loan Criteria

Different lenders have varying criteria when it comes to expat mortgage lending. Conduct thorough research to understand the lending landscape and identify lenders who are more receptive to expat borrowers. Pay attention to factors such as interest rates, loan-to-value ratios, and fees. Being well-informed about your options will empower you to make the best borrowing decisions.

Tip 10: Stay Informed About Market Trends

As an Australian expat, it's essential to stay updated on market trends and changes in lending policies. Keep an eye on interest rate fluctuations, regulatory updates, and changes in lending criteria. Following reputable news sources and consulting with industry professionals will ensure you stay informed and can adapt your borrowing strategy accordingly.

Conclusion

By implementing some of all of these ten tips, you'll be well on your way to increasing your borrowing power in Australia in 2023. Remember, improving your credit score, reducing debt, increasing savings, and demonstrating financial stability are key factors that lenders consider. Additionally, seek professional advice, choose the right loan product, and stay informed about market trends. As an Australian Expat Mortgage Broker, we’re here to support and guide you through the borrowing process, helping you achieve your homeownership dreams. Take action today, and watch your borrowing power soar!

Ally Home Loans Pty Ltd is your ally in finance for all of your home loan, investment property, business and commercial financing needs. With our wide range of lending solutions, expertise in financial planning and investment strategies, and extensive experience in working with both Australian residents and Australian expats, we are your partners for your lending needs.

Book an obligation-free, complimentary consultation here today.

Ally Home Loans Pty Ltd is an Authorised Credit Representative (Credit Representative Number – 494608) of My Local Broker (Australian Credit License – 481374). Important Disclaimer: Your complete financial situation will need to be assessed before acceptance of any proposal or product.