Can Australian Expats Refinance a Property and Release Equity Using Foreign Income?

Australian citizens living overseas may be able to refinance an Australian investment property and release equity. Learn how lenders assess foreign income, currency, tax residency, cash out and LVR.

Australian citizens who live and work overseas may be able to refinance property they own in Australia and release equity.

The available lender pool is smaller than it is for an applicant who lives and earns income in Australia.

The application becomes more restrictive where:

• income is paid in a foreign currency;
• the borrower is not an Australian tax resident;
• the requested loan exceeds 80% of the property value;
• the borrower wants additional cash out;
• the employer is unfamiliar to the lender;
• employment commenced recently;
• income includes bonuses or allowances; or
• the applicant is self-employed overseas.

Across the 22 foreign-income lender policies reviewed, at least 12 provide a pathway for Australian citizens living overseas or applicants relying on overseas PAYG income.

The maximum usable income, LVR and acceptable currencies vary considerably.

Is an Australian citizen living overseas considered a non-resident?

The answer depends on the context.

Citizenship, immigration status, tax residency and lender classification are separate concepts.

An Australian citizen does not lose citizenship by moving overseas. They may, however, become a foreign resident for Australian taxation purposes.

Australian tax residency depends on the person’s circumstances and connection to Australia. The ATO applies four alternative residency tests, including the ordinary-concepts, domicile, 183-day and Commonwealth superannuation tests. Citizenship and physical location alone do not determine the result.

Lenders also use terms such as:

• expat;
• overseas Australian;
• non-resident Australian;
• foreign-income applicant; and
• offshore borrower.

A lender referring to a “non-resident” may mean someone who is not an Australian citizen or permanent resident. Another may use it for an Australian citizen currently living overseas.

The applicant should therefore be assessed against the definitions in the relevant lender policy.

Can Australian expats obtain home loans?

Yes.

Several lender policies specifically provide for Australian citizens living and working overseas.

Common acceptable purposes include:

• refinancing an Australian investment property;
• refinancing an Australian owner-occupied property retained while overseas;
• purchasing an Australian investment property;
• releasing equity for an acceptable purpose;
• purchasing vacant land; and
• consolidating permitted debts.

Some lenders accept Australian permanent residents or New Zealand citizens living overseas. Others restrict their expat policy to Australian citizens.

A lender accepting overseas income does not necessarily accept an applicant who lives overseas. Macquarie, for example, accepts some foreign income for applicants living in Australia but no longer accepts applicants who reside outside Australia.

Which lender policies allow Australian expat income?

The following examples illustrate the different approaches in the lender policies. They are not lender recommendations.

ANZ

ANZ has a specific offshore expat pathway for Australian and New Zealand citizens living and working overseas.

The lender policy requires employment income, generally on a PAYG basis. Contractors may be considered where they work under a single employment contract. Overseas business and other non-PAYG income are not accepted under the standard expat pathway.

The policy allows foreign income to provide up to 100% of the income required for servicing, but the converted net amount is discounted by 20%.

Evidence may include:

• passport;
• overseas work rights;
• three months of payslips;
• three months of salary credits;
• employment contract; and
• employer contact details.

Bankwest

Bankwest accepts specified foreign PAYG income and distinguishes between listed and other approved currencies.

For listed currencies, including several major currencies and selected Middle Eastern and Asian currencies, the lender policy generally uses 80% of net income.

For other acceptable currencies, the policy may use 70% of net income and require additional approval.

Foreign self-employed income is not accepted.

Verification generally includes:

• an employment contract or employer letter;
• recent payslips; and
• three months of salary credits.

Commonwealth Bank

Commonwealth Bank accepts qualifying foreign currency income for Australian citizens and permanent residents living and working in Australia or overseas.

Its policy deducts 20% from eligible gross foreign income before converting and assessing it.

Negative-gearing benefits are generally not applied where foreign income is used unless there is evidence that the foreign income and relevant tax treatment appear in Australian tax returns.

Guarantor support is not available where foreign currency income is required for servicing.

Suncorp Bank

Suncorp Bank accepts qualifying overseas income received continuously for at least six months.

Its lender policy generally uses 70% of the Australian-dollar equivalent to allow for exchange-rate movements.

The policy is limited to acceptable currencies and employment income. Overseas self-employed income is not accepted.

Suncorp’s policy provides for Australian citizens temporarily living overseas rather than general lending to non-residents.

ME Bank

ME Bank accepts qualifying overseas employment income for Australian citizens.

The lender policy generally uses 80% of net overseas income after conversion to Australian dollars.

Acceptable currencies are restricted, and overseas self-employed income or self-employed contracting income is not accepted.

The applicant may need to provide:

• employment contract or employer letter;
• three payslips;
• salary-credit statements; or
• Australian tax returns showing foreign income.

Gateway Bank

Gateway’s lender policy allows applications from Australian citizens who live and work overseas where they are employed by an established Australian business or large multinational organisation.

The policy:

• caps the LVR at 80%;
• uses up to 90% of overseas income;
• excludes self-employed applicants; and
• may require an Australian power of attorney for loan documentation.

RedZed

RedZed considers foreign PAYG income for Australian citizens employed by a multinational organisation.

Foreign self-employed income, overseas rental income and foreign pensions are excluded under the standard policy.

The lender converts the income into Australian dollars and uses 75% for servicing.

La Trobe Financial

La Trobe Financial considers foreign income, temporary residents and non-resident applicants.

Its lender policy allows PAYG and self-employed income, subject to verification and translation requirements.

Up to 90% of qualifying foreign income may be used in the serviceability calculation.

Resimac

Resimac’s lender policy permits up to 90% of verified overseas income after conversion to Australian dollars.

Income documents must be translated where required.

Where foreign income cannot be adequately verified, the lender may require the Australian property’s rental income to cover the assessed loan repayment under its specified calculation.

Firstmac

Firstmac considers Australian and New Zealand citizens who live and work overseas.

Up to 90% of overseas income may be used after conversion.

Standard employment verification applies, together with English translations where required.

ORDE Financial

ORDE has a dedicated expat product for Australian citizens and permanent residents who live overseas or derive more than half their income from overseas sources.

The policy includes:

• Australian property purchases;
• refinances;
• vacant land transactions;
• foreign income assessed at 90%; and
• a maximum expat LVR of 80%, or 75% for vacant land.

Lenders without a standard expat pathway

The lender policies reviewed show that:

• MyState does not accept applications where the borrower lives and works overseas or relies on overseas income;
• People First Bank does not generally accept foreign income;
• ING does not accept foreign income;
• UBank does not accept foreign income; and
• Macquarie requires applicants to live in Australia and be Australian tax residents.

This is why a lender that works well for an ordinary refinance may not be available to an expat applicant.

Can an expat refinance above 80% LVR?

It is considerably more difficult.

Most of the clear expat pathways in the lender policies either:

• cap the LVR at 80%;
• exclude lenders mortgage insurance;
• impose additional restrictions above 80%;
• reduce the acceptable cash-out amount; or
• move the application into a specialist product.

A clear general pathway for an Australian citizen living overseas, relying on foreign PAYG income and releasing equity above 80% LVR was not evident in the lender policies reviewed.

Some broader foreign-income or specialist products advertise higher refinance LVRs. Those products may require the borrower to be living in Australia, have income paid into an Australian account or meet another residency definition that excludes a genuine offshore expat.

The borrower should not rely on a lender’s headline maximum LVR without confirming that it also applies to:

• overseas residents;
• foreign currency income;
• investment property;
• refinance;
• cash out; and
• the property’s postcode and type.

Why is 80% LVR important?

At or below 80% LVR, the application will generally avoid lenders mortgage insurance.

This matters because several lender policies do not make mortgage insurance available where:

• income is received in foreign currency;
• the borrower resides overseas;
• salary is not paid into an Australian financial institution; or
• the applicant falls outside the mortgage insurer’s acceptable borrower policy.

Suppose the existing loan balance and requested equity release total $560,000.

If the property is valued at $700,000:

• proposed loan: $560,000;
• property value: $700,000; and
• LVR: 80%.

If the valuation is only $650,000:

• proposed loan: $560,000;
• property value: $650,000; and
• LVR: approximately 86.2%.

A relatively small valuation difference can move the application from a potentially acceptable expat policy into an unavailable high-LVR tier.

Can an expat release equity?

Potentially.

The lender will want to know exactly how the released money will be used.

Acceptable purposes may include:

• renovations;
• investment;
• education costs;
• purchasing another property;
• paying a tax liability;
• repaying other debts;
• business investment, with restrictions; or
• retaining a documented financial buffer.

The lender may require evidence such as:

• invoices;
• contracts;
• investment account details;
• debt statements;
• sale contracts; or
• a written explanation of the purpose.

A vague request for “personal use” may be subject to a lower cash-out limit or additional verification.

The amount of cash out can also affect whether the loan is considered a straightforward refinance or a materially increased exposure.

Does the lender use the full overseas salary?

Usually not.

Most lender policies apply a foreign-income haircut.

The lender first converts the income to Australian dollars and then uses only a percentage of the resulting amount.

Examples in the lender policies include:

• 60% of qualifying income;
• 70% of net income;
• 75% of converted income;
• 80% of gross or net income;
• 90% of converted income; or
• 100% of a carefully defined base-income amount, calculated from the lower of verified sources.

The adjustment protects against:

• exchange-rate fluctuations;
• differences in foreign tax;
• foreign employment risk;
• transfer restrictions;
• document-verification difficulties; and
• income that may be harder to enforce or confirm.

A person earning the equivalent of $150,000 overseas may be assessed using only $105,000 to $135,000, depending on the lender policy and whether the starting amount is gross or net.

How are currency movements treated?

The lender will apply an approved exchange rate at or near the assessment date.

It may then:

• apply a fixed percentage haircut;
• use the lower salary credit;
• use the lower of the employment contract and bank credits;
• require a particular currency to be on an approved list; or
• decline volatile or restricted currencies.

A favourable conversion rate shown on an online calculator does not necessarily match the rate used by the lender.

Some lenders use:

• their own foreign-exchange rate;
• a nominated public currency converter;
• a bank cheque-buying rate; or
• a separate currency conversion factor.

The exchange rate may be refreshed before unconditional approval or settlement.

Is foreign self-employed income accepted?

Options are much narrower.

Many expat lender policies accept only PAYG income.

The policies for ANZ, Bankwest, Suncorp Bank, ME Bank, RedZed and Gateway either exclude foreign self-employed income or restrict it heavily.

La Trobe Financial provides a stated pathway for foreign self-employed income, subject to:

• two years of financial statements;
• business bank statements;
• translations;
• currency conversion; and
• the complete credit assessment.

Westpac and St.George may consider foreign self-employed income by credit exception rather than under their standard foreign-income process.

An overseas contractor may also be treated as self-employed even where they describe their work as employment.

Related research: Self-Employed Home Loans: Which Australian Lenders May Accept 1-Year Financials, 1-Year ABNs or Alt Doc Income?

Does Australian tax residency matter to the lender?

Sometimes.

Some lender policies require the applicant to be an Australian tax resident. Others accept an Australian citizen who is a foreign resident for tax purposes.

Tax residency can affect:

• the documents available to verify income;
• whether foreign salary appears in an Australian tax return;
• whether negative-gearing benefits can be used;
• how the lender calculates tax;
• the borrower’s Australian rental income; and
• the tax advice required before cash is released.

Australian tax residency is a factual legal test and should not be assumed from citizenship or the period spent overseas.

An owner of an Australian rental property also needs to deal correctly with the property’s rental income and expenses under Australian tax rules. Rental income must be reported according to the owner’s legal interest in the property.

A mortgage broker or lender cannot determine a borrower’s tax residency or provide personal tax advice unless appropriately qualified.

Can negative gearing improve expat borrowing capacity?

It depends on the lender policy and the borrower’s tax position.

Some lenders do not apply negative-gearing benefits where foreign income is used.

Others may allow the benefit only where:

• the borrower is an Australian citizen or resident;
• the foreign salary appears in an Australian tax return;
• the rental loss is shown in the return;
• an ATO notice of assessment is supplied; and
• the lender is satisfied that the tax benefit is genuinely available.

A borrower who is not an Australian tax resident should not assume that a standard Australian negative-gearing calculator applies.

The tax treatment should be confirmed by an Australian tax adviser with cross-border experience.

Related research: Can a Fully Maintained Company Car Increase Your Home Loan Borrowing Capacity?

What evidence will an expat borrower need?

Depending on the lender policy, documents may include:

Identity and residency

• Australian passport;
• evidence of permanent residency where relevant;
• overseas visa or work permit;
• evidence of current residential address;
• foreign tax identification number; and
• evidence of an Australian address or contact where required.

Employment and income

• employment contract;
• employer letter;
• recent payslips;
• three to six months of salary credits;
• evidence of employment tenure;
• bonus or commission history;
• foreign tax returns;
• Australian tax returns;
• notices of assessment; and
• employer contact details.

Translation and currency

• original foreign-language documents;
• translations completed by an acceptable accredited translator;
• evidence of the exchange rate used; and
• a calculation showing the Australian-dollar equivalent.

Australian property

• existing loan statements;
• rates notice;
• lease;
• rental statements;
• property-management statement;
• valuation;
• evidence of insurance; and
• details of the requested cash-out purpose.

Overseas financial position

• foreign credit report;
• foreign loan and credit card statements;
• overseas rental commitments;
• local living expenses;
• school fees;
• insurance;
• tax liabilities; and
• details of any employer-provided housing.

The lender must assess the applicant’s actual overseas expenses rather than applying an unrealistically low Australian household budget.

Will the applicant need an Australian bank account?

Often.

The lender may require:

• loan repayments to be deducted from an Australian account;
• Australian rental income to be paid into that account;
• released equity to be paid into an Australian account; and
• sufficient money to be maintained for repayments and property expenses.

Some policies also require foreign salary to be paid into an Australian bank account. Others accept salary credits into an overseas account.

The account requirement should be confirmed early.

Can loan documents be signed overseas?

Usually, although the process may be more involved.

Depending on the lender and country, documents may need to be:

• witnessed by an approved person;
• signed at an Australian consulate;
• completed through an approved electronic-signing process;
• certified or notarised;
• returned in original form; or
• signed by an Australian attorney under a registered power of attorney.

Some lender policies expressly require an Australian resident or legal firm to be appointed to receive notices.

The documentation process should be confirmed before settlement is booked.

Example: expat refinance and equity release

Consider an Australian citizen who lives overseas and earns the equivalent of $150,000 a year in foreign PAYG income.

They own an Australian investment property with:

• an existing loan of $480,000;
• estimated value between $650,000 and $720,000; and
• requested cash out of $60,000.

The proposed new loan is $540,000 before refinancing costs.

At a $720,000 valuation:

• LVR is 75%.

At a $675,000 valuation:

• LVR is 80%.

At a $650,000 valuation:

• LVR is approximately 83.1%.

The first two results may fit several expat lender policies.

The third may fall outside policies that:

• cap expats at 80%;
• exclude mortgage insurance;
• restrict cash out above 80%; or
• require a different product.

The serviceability result will also depend on whether the lender uses 70%, 75%, 80% or 90% of the converted salary.

The main point

Australian expats can refinance Australian property and may be able to release equity using foreign employment income.

The lender assessment will depend on:

• citizenship and residency status;
• country of employment;
• foreign currency;
• PAYG or self-employed status;
• employment tenure;
• usable income after shading;
• requested cash-out purpose;
• Australian property valuation;
• resulting LVR; and
• whether loan documents can be completed overseas.

An application at or below 80% LVR has a materially broader lender pool than one above 80%.

The valuation should be investigated early, as a relatively small difference can determine whether the transaction fits an expat policy.

General information disclaimer

This article contains general information only and does not take into account your objectives, financial situation or needs. It does not constitute financial, taxation, legal, foreign-exchange, immigration or credit advice.

Lender policies, acceptable countries and currencies, income-shading methods, cash-out limits, maximum LVRs and document requirements can change without notice. An Australian passport, overseas salary or Australian property does not guarantee loan approval.

Tax residency and the taxation of foreign income and Australian property are complex and depend on individual circumstances. Obtain advice from an appropriately qualified Australian tax adviser and legal professional where required. Loan approval remains subject to the lender’s complete credit assessment, acceptable valuation and policy at the time of application.