For Australian expats working overseas, navigating the home loan process back home can feel overwhelming. Questions like “Do lenders accept foreign income?” or “Which lender is right for my situation?” are common. The reality is that many Australian lenders have policies tailored for expats, but not all will treat your foreign income equally. Some only assess a portion of your income due to currency risks, some will accept bonuses and others won’t, some will accept remuneration in shares while others won’t, and others have stricter requirements for documentation.

If you’re an Australian expat seeking to purchase property or refinance an existing loan, finding the right lender is essential. With the right guidance, it doesn’t have to be complex. Let’s explore how lenders approach foreign income, which banks cater to expats, and what you can do to secure the best loan terms.

Do Australian Lenders Accept Foreign Income?                                

The short answer is yes, but there are nuances. Lenders in Australia often accept foreign income, but they apply specific policies to manage risks like currency fluctuations. This means they won’t always count 100% of your earnings. Most banks assess only 60% to 80% of your foreign income, depending on factors such as the currency you’re paid in, the stability of that currency, and your financial documentation.

For example, if you earn $100,000 USD annually, a lender may apply a 30% discount to account for exchange rate risks, meaning only $70,000 will be considered in their calculations for borrowing power. Stable currencies like USD, GBP, SGD, HKD, AED and EUR are generally treated more favourably than volatile ones, such as the Indonesian Rupiah or Indian Rupee.

Here are some key types of foreign income lenders may accept:

• Salaried Income (PAYG): Income from full-time employment is widely accepted.
• Rental Income: Foreign rental income is sometimes accepted, but only a percentage of it is usually assessed.
• Self-Employed Income: This can be trickier, requiring detailed tax returns and proof of consistent earnings.
• Dividends and Investments: Some lenders will accept income from overseas investments or dividends, though policies vary.

If your income falls into one of these categories, you’ll likely be eligible to apply for a loan. However, every lender has different criteria, so it’s essential to compare options carefully.

Top Lenders for Australian Expats

Some Australian lenders are more accommodating of expat borrowers than others. Here are three of the top banks for expats based on their foreign income policies:

Bankwest
Bankwest is a popular bank for expats as they often have favourable policies for Australian expats looking to borrow in Australia, particularly where they’re reside in a country with relatively low tax rates. For example, an Australian expat in Hong Kong or Singapore, may see a boost in their borrowing capacity as a result of this.

ANZ Bank
ANZ is another popular choice for expats. They accept foreign income for salaried employees and allow you to borrow up to 80% of the property value (Loan-to-Value Ratio or LVR). However, ANZ doesn’t allow foreign rental income to be included in your application, which can be a limitation for property investors.

Westpac Bank
Westpac also supports expats, offering home loans with up to 80% LVR for those earning foreign income. They assess income based on the stability of the currency and apply similar discounting policies. Westpac is particularly popular for its customer support and streamlined expat application processes.

These banks are just a starting point and the list is constantly changing as banks update their credit policies. Smaller lenders and niche options may also offer competitive terms, especially if your situation doesn’t fit the standard criteria.

How Lenders Assess Your Foreign Income

When applying for a home loan as an Australian expat, understanding how lenders assess foreign income is critical. Most banks follow these steps:

• Income Discounting: Foreign income is discounted to account for currency fluctuations. Discounts typically range from 20% to 40%, depending on the currency.
• Currency Conversion: Your income is converted to Australian dollars (AUD) using the prevailing exchange rate. Some lenders use conservative rates to mitigate risk, while others will accept the currency rate quoted by an FX provider such as xe.com.
• Proof of Income: Lenders require detailed documentation to verify your earnings. This often includes:
  Payslips (at least three months’ worth), Tax returns or foreign tax assessments,
  Employment contracts,
  Bank statements showing salary deposits. For example, if you’re earning in USD, the bank might calculate your borrowing power like this:

Annual Income: $100,000 USD
Exchange Rate: 1 USD = 1.5 AUD
Converted Income: $100,000 x 1.5 = $150,000 AUD
Discount Factor: 30%
Assessed Income: $150,000 x 70% = $105,000 AUD
In this scenario, the bank considers $105,000 AUD as your annual income for loan purposes.

Challenges for Expats Applying for Home Loans

While expats have plenty of loan options, there are some unique challenges to be aware of:

• Currency Risks: Currency fluctuations can impact how much of your income is assessed, reducing your borrowing power.
• Stricter Documentation: Lenders require extensive proof of income and employment, which can be difficult to gather if you’re working in a different tax system.
• Higher Interest Rates: Some lenders charge expats higher interest rates than they offer to Australian residents.
• Limited Lender Options: Not all banks cater to expats, meaning you may have fewer choices compared to residents, however there are often still plenty of options to choose from.

Working with a specialist mortgage broker can help you overcome these challenges by connecting you with the right lender and ensuring your application is presented effectively.

How to Maximise Your Borrowing Power

To secure the best home loan terms, Australian expats should take proactive steps to strengthen their application:

• Organise Documentation: Ensure you have clear and comprehensive records of your income, including payslips, contracts, and tax returns.
• Choose a Stable Currency: If possible, get paid in a currency that’s considered low-risk, such as USD, GBP, or EUR.
• Work with a Broker: Specialist brokers understand the expat lending landscape and can match you with lenders that suit your needs. They also negotiate on your behalf, potentially saving you thousands over the life of your loan.
• Get Pre-Approved: A pre-approval helps you understand your borrowing capacity and shows sellers that you’re a serious buyer.

Why Professional Advice Matters

Finding the right lender as an Australian expat can be complex, but you don’t have to navigate it alone. Mortgage brokers who specialise in expat home loans understand the nuances of foreign income assessments and can connect you with lenders that offer the best terms for your situation.

At Ally Home Loans, we work closely with Australian expats to simplify the process, provide expert advice, and ensure your home loan aligns with your financial goals. Whether you’re buying your first investment property or refinancing an existing loan, our team is here to help every step of the way.

Conclusion

Securing a home loan as an Australian expat might seem challenging, but with the right knowledge and support, it’s entirely achievable. Many lenders, including major banks like HSBC, ANZ, and Westpac, offer loans for expats, but their policies on foreign income vary. By understanding how lenders assess income, preparing your documentation, and working with a specialist broker, you can make the process smoother and increase your chances of approval.

Ready to explore your home loan options? Contact Ally Home Loans today for personalised guidance tailored to your unique situation as an Australian expat. Let us help you turn your property goals into reality.

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.