Can Permanent Residents Living Overseas Buy Property in Australia?

Are you a permanent resident of Australia living abroad and thinking about buying property in Australia? As an expat, navigating the home loan process might seem overwhelming. However, obtaining a mortgage as an Australian permanent resident based overseas is a possibility.

While the general process is similar to that for Australian residents, there are some differences to consider, such as stamp duty, loan type options, and lending criteria. It’s essential to be aware of these differences to avoid any complications during the mortgage application process. Joint property investment with foreign nationals can also present further complexities.

In this guide, we’ll provide professional advice to help you navigate the process of getting a home loan and approval in Australia as a permanent resident living abroad.

Can Overseas Permanent Residents Buy Property in Australia?

If you’re looking for a home loan in Australia as a permanent resident living overseas, this page is for you. At Odin Mortgage, we understand how challenging it can be to find the best home loan when buying your property when you’re not residing in Australia.

This page provides professional guidance on the maximum borrowing limit, purchasing property with foreign income, stamp duty charges, and applying for mortgages as a permanent resident living abroad. You might not be aware of what loans you qualify for.

We can assist all Australian expats with their home loan options to get on the property ladder and what to watch out for with your mortgage application.

Australian Permanent Residents Living Overseas

A permanent resident living overseas is someone with Australian residency living abroad, either on a temporary visa or permanent resident visa, like in Hong Kong, Singapore, or the UAE.

Those whose primary residence is overseas might find it harder to obtain approval for their home loan than someone who is only a temporary resident abroad. This is usually because lenders require higher deposits and are more suspicious of currency values fluctuating.

Many banks and lenders won’t offer home loans to Australian citizens living overseas. Some require special terms for overseas Australians. However, at Odin Mortgage, we aim to find conventional mortgages for all Australian expats, whether they are temporary residents abroad or permanently living overseas on the same terms.

Legally, however, there are some stipulations for Australian expats to qualify in order to purchase a property in Australia. In recent years, particularly, the Australian regulators have tightened restrictions to limit foreign investments into residential property in Australia. Yet, it is not impossible. We are here to guide you through every step to purchase your property in Australia from anywhere in the world.

Permanent Australian Residents with Foreign Income

This is where many mortgage lenders will turn their backs on you as an Aussie expat applying for a home loan. Not all lenders will offer you a home loan if your main source of income is in foreign currency.

If you have a permanent residency in Australia, lenders will consider 100% of your net income when considering approval for your home loan when buying a property in Australia. However, if you live in another country, most lenders will be more meticulous about your financial situation.

Most banks will discount your income by 20% if you earn an acceptable foreign currency and will apply Australian taxes to your income regardless of where you are residing, which will impact serviceability and borrowing capacity.

However, here at Odin Mortgage, we have lenders that would apply local effective tax rates to your foreign income, allowing you to maximise your borrowing.

Proving Assets and Foreign Income

You may need to seek professional advice about how to provide proof of your work history and income. The lender may require you to present backdated payslips to prove your ability to repay the mortgage.

Furthermore, if you have a permanent resident spouse who is not from Australia, it might be more challenging if you put them down as a home buyer. However, if you need their income for borrowing power, you might be able to add them as a co-borrower rather than a buyer.

It is best to speak to a mortgage broker who specialises in expat mortgages to understand how to present your professional, financial, and personal information to the bank.

Maximum Lending Ratios for Permanent Residents

Before a lender decides to offer you a loan, they assess your ability to repay back the loan and interest rates. To work out if you qualify, lenders calculate something called the loan-to-value ratio (LVR). This calculation uses the value of the property and the deposit amount, or down payment, to judge your ability to repay the mortgage.

The loan-to-value ratio is calculated by dividing the borrowing amount by the property value. For instance, if the property value is $500,000 you will need a loan of $350,000. The loan-to-value ratio is 70%.

For those with a permanent resident visa abroad, banks require a minimum deposit of 20%. Most banks have a maximum value ratio limit, sometimes as high as 90-95%. However, lenders often require you to get Lenders Mortgage Insurance (LMI) to protect the bank should you default on a payment.

You can use this calculation to work out how big a deposit you will need to save.

The bigger the deposit you can offer, the lower the value ratio will be, and therefore, the more willing lenders will be to offer you a home loan. The lender might reward you with lower interest rates and other benefits as it is less risky for them to borrow.

On the other hand, a high-value ratio suggests to the lender that you are a risk. You also will have to borrow more money to cover the property investment, leaving you vulnerable to rising interest rates. You might also be charged with mortgage insurance, which is a one-off lump sum additional charge.

Be Careful of the Stamp Duty Surcharge for Foreign Citizens!

If you’re a permanent resident living overseas and want to invest in property, you need to watch out for the foreign stamp duty surcharge when buying property in Australia. This surcharge is applicable to all Australian states, except the Northern Territory. The stamp duty regulations and requirements differ in each state. It is a good idea to talk to a professional about whether you are eligible to pay stamp duty.

Stamp duty typically ranges between 4-5% of the property’s value. If you purchase a resident home in Australia costing $1,000,000, you might find yourself paying between $40,000 – $50,000 in stamp duty. This hefty addition to the mortgage can be very challenging for foreign citizens, or Australian expats married to foreign citizens.

As mentioned earlier, be careful if your spouse is not an Australian citizen. Foreign home buyers are required to pay the stamp duty surcharge of 7-8% of the property’s value. Even if you purchase the property together, you could be jointly hit with the surcharge. If you are solely relying on your income, you should be okay.

However, if you need your spouse’s money to get a loan, speak to a professional about your circumstances.

Also, if you are newly residing in Australia, you may similarly be eligible to pay the stamp duty surcharge. If your permanent resident visa is new, double-check whether you meet the requirements. For example, in some states, you might have to pay a surcharge if you have had your visa for less than 200 days.

How do Interest Rates Differ for Permanent Residents Overseas?

Don’t worry, Australians residing abroad are able to get the same interest rates on their FHA loans as anyone living in Australia. Over the last twenty years, market interest rates have fluctuated between 3-5% . Make sure to compare different mortgage permanent resident lenders to find the best home loans and interest rates.

Australian expats are also able to apply for interest-only, fixed-rate or variable-rate home loans. Interest-only loans offer the opportunity to only pay the interest at a fixed rate for an introductory period of time. After this period, usually no more than five years, the borrower then must repay the principal amount back with each monthly payment.

Fixed-rate home loans are a type of personal loan that offers a fixed interest rate for the first few years of the loan. Similarly, this introductory period can be up to five years maximum. The benefit of a fixed-term loan is that you repay a stable, regular amount each month. If you’re nervous about budgeting for your mortgage repayments this might be a good option.

However, the downside of fixed-term loans is that you might end up paying higher interest rates if the interest goes down. Although, you will similarly pay lower interest rates if the rate goes up.

A variable-rate mortgage is when you pay whatever interest the market interest rate is. This can fluctuate from month to month, sometimes higher than the starting rate, sometimes lower. Both fixed-rate loans and interest-only automatically become varying-interest loans after the introductory period is up.

Apply for a Mortgage as a Permanent Resident

The process of applying for a mortgage is much the same if you reside in Australia as it is if you are a temporary resident overseas.

The good news is that you don’t need approval from the Foreign Investment Review Board (FIRB) to buy a house in Australia as an expat.

Typically, the bank will look at your valid identification, personal information, financial details, visa, credit history and credit score. As you are living abroad, lenders might conduct a more thorough search into your credit report before offering you a home loan.

Mortgage brokers and lenders might also request more information. There are many countries in the world, and not every bank in Australia can be an expert in how each of them operates. Therefore, the process to get your home loan approval might be more time-consuming for an expat than for those living in Australia.

Lenders will then look at your LVR to decide whether to offer you a home loan. You will also need to present your passport, proof of address, credit history, pay slips, and visa to get loan approval.

Frequently Asked Questions

Can an Australian permanent resident buy a property in Australia with a mortgage?

Yes! As a permanent resident, you have the same rights as Australian citizens when it comes to buying property. You can apply for a mortgage without any special permission. Even if you’re an expat living abroad, as long as you’re a permanent resident, you can still buy property in Australia.

Do you need to be a permanent resident to buy property in Australia?

While permanent residents have unrestricted rights to buy property, temporary residents might have to obtain approval from the Foreign Investment Review Board (FIRB). This regulation exists to prevent foreign investment from disrupting the Australian property market. So, if you’re a temporary resident, make sure to seek advice before buying a home in Australia.

What costs are involved in buying a property in Australia as an Australian PR living overseas?

Purchasing property in Australia involves several additional expenses on top of the mortgage itself. These expenses include legal fees, loan establishment fees, stamp duty, FIRB approval fees (for foreigners and temporary residents only), property inspection fees, and buyer agent fees. It’s always a good idea to budget an extra 5% of the house value to cover these expenses.

How much can I borrow as a permanent resident overseas to buy a property in Australia?

As an Australian permanent resident living overseas, you can usually borrow as much as Australians living in Australia. However, expats typically need to provide a deposit of at least 20%, which means you can borrow up to 80% of the property’s value. However, it’s important to note that the country you reside in and its currency may affect the amount you can borrow.