Low Deposit Home Loans

If you don’t have a large deposit ready, you can still get a home loan. In fact, if you are like many Australians today, saving the standard 20% deposit is close to impossible, unless you put off buying a home for years in order to save a bigger deposit.

Property prices across the country have been steadily rising for years but income levels haven’t increased at anywhere near the same rate. As a result, that ideal of the 20% deposit is too far out of reach for many.

If this is the case for you, you can still apply for a low deposit home loan.

What Is a Low Deposit Home Loan?

A low deposit home loan refers to a loan with a deposit that is less than 20% of the property value. Banks like to see a deposit of 20% or more with residential mortgage lending. Anything less than this is viewed as a high risk from the lender’s perspective.

However, most lenders still offer home loans with a smaller deposit. These low deposit loans are also known as high Loan to Value Ratio (LVR) home loans because the ratio of the deposit to the property price is considered high – it’s greater than 80%.

The bank is taking on more risk lending to you when you have a low deposit and need to borrow more than 80% of the purchase price. If you happen to default on your mortgage, your lender will have to recoup the money used to purchase the property. If home values go down or if the property sits on the market for a long time, the bank could lose money. This is why banks prefer a larger deposit; it helps to prevent them from taking a loss.

As long as you meet other lending criteria, however, you can still qualify. Keep in mind, lenders will have stricter criteria and certain requirements if you are applying for a home loan with a small deposit.

How Much Do I Need for a Low Deposit Loan?

The higher your deposit, the easier it will be to get the loan you want and the more options you’ll have. You may be able to qualify with different lenders with a:

15% deposit
10% deposit
5% deposit

Call us on (07) 3146 5732 or fill in our home purchase enquiry form to learn more about what loan you can qualify for based on your unique financial situation.

How to Qualify for a Low Deposit Loan

Here’s the thing, as long as you have at least a 5% deposit and you can demonstrate you are a reliable borrower, some lenders will be willing to approve your loan application. All lenders will have their own criteria for low deposit home loans but, in general, these are the standards you’ll want to have met before you apply.

Good credit: Missed or late payments on personal loans and credit cards, a history of overdue rent, or any other black marks on your credit file will make it hard to qualify, especially if your deposit is 10% or less than the property value. You want to enter into the application process with squeaky clean credit, with the last two years of your credit history holding the most weight.

Minimal debt: When you are about to borrow hundreds of thousands of dollars to buy a house, you want your other debts to be as low as possible, especially any unsecured debts like credit cards or an unsecured personal loans. Ideally, your unsecured debts total less than 5% of the purchase price when you apply for a low deposit loan.

Strong income: One of the most important factors for any type of home loan is your income. It needs to be high enough to allow you to comfortably manage your mortgage repayments. Keep in mind, if you have a high income but you also have high expenses, banks may view this as a red flag. Banks also prefer a consistent income. This makes it easier for them to assess your loan serviceability, which is your ability to make your repayments.

Stable job: Lenders want to know you are likely to maintain this strong income. Ideally, you’ve worked at your current job full time for at least 6 months. If you are self-employed, a minimum of 2 years is preferred. Banks will also consider how long you’ve been in the same line of work. They want to see at least 2 years in the same industry.

Seasoned savings: With a high LVR loan, it’s even more important to demonstrate you know how to responsibly manage your finances. One factor lenders will look at to get an understanding for your financial habits is your savings history. Ideally, you’ve been saving for your deposit over time. On the other hand, a lump sum in your savings account – for example, if your parents gifted you all or most of your home deposit – doesn’t do anything to demonstrate your financial responsibility.

Appropriate asset position: Lenders will assess your asset position relative to your age and income. If you are in your early 20s and are buying your first home, banks won’t expect you to have accumulated a lot of assets, like a car, investments, and savings. However, if you are older, and especially if you’ve been earning a high income for a number of years, lenders will see it as a red flag if you don’t have many assets.

When applying for a low deposit home loan, it’s also important to consider both the nature of your property and the purpose of the loan to increase your chances of qualifying.

Banks usually have special restrictions on some low deposit loans. If the property type or location would make it difficult to sell in the future if you do happen to default on your repayments, the bank may not be willing to offer you a mortgage without a bigger deposit. Restrictions include properties that are in high rise buildings or mining towns.

Why you want the loan also matters. If you are buying your first home or investing in a new property, or you want to refinance to save money on lower interest rates, your loan purpose shouldn’t raise any concerns. If, on the other hand, you need to refinance to consolidate your other debts, a bank will think twice about a high LVR loan because of the risk involved for them.

Low deposit home loans include a wide range of Loan to Value Ratios. And, there’s no one-size-fits-all criteria for qualifying for a high LVR loan. But, in general, the lower the LVR (and the higher your deposit in relation to the property value) the more flexibility you’ll have when applying. For example, with a 15% deposit, lenders will be more lenient with their criteria than they would be if you only had a 5% deposit. You’ll also have more lenders to choose from with a bigger deposit, even though you are still applying for a low deposit home loan.

At Nexus Money, we specialise in high LVR home loans and know what different lenders are looking for. If you want to know more about what your low deposit loan options are, call us on (07) 3146 5732 today.

Which Lenders Offer Low Deposit Loans?

Not all lenders approve low deposit home loans even if you meet all the lending criteria in terms of income, credit, and your debt and asset positions. The major banks, in particular, hesitate to approve mortgages with an LVR over 80%.

Most lenders will approve a low deposit mortgage with at least a 10% deposit but only if you can prove you are a strong borrower. Also, you’ll likely have to pay Lender’s Mortgage Insurance (LMI).

For a deposit that is smaller than 10% of the purchase price, you’ll be limited in the number of lenders. There are several lenders who will offer these loans, however, these are often at higher rates.

It’s not always easy to figure out which lenders will approve low deposit mortgage applications. For borrowers with a low deposit, we know which lenders have more flexible lending criteria.

Call us on (07) 3146 5732 or fill out our online enquiry form to learn about how we can help you.

Low Deposit Home Loan FAQs

Will I have to pay a higher interest rate?

Not necessarily. If other factors aside from your deposit size, like income, having a lot of assets, and clean credit can demonstrate your strength as a borrower, you may still be able to qualify for a mortgage with a competitive interest rate. It all depends on the whole story of your financial situation.

Do lenders offer special deals on high LVR loans?

They do from time to time. We know when lenders offer interest rate discounts, rebates, and other special offers for low deposit loans. Contact us today to learn more.

Do I have to pay LMI?

Having to pay Lender’s Mortgage Insurance will add to the overall cost of your mortgage. You want to avoid paying it if you can. When you have a low deposit, you can find a guarantor to secure your mortgage with their property to avoid LMI.

Also, some lenders offer 90% LVR home loans to eligible professionals such as doctors and dentists. They’ll either waive LMI of offer a discounted premium.

In both cases, with a guarantor or with a 10% deposit if you are a qualifying professional, be prepared to meet strict lending criteria in order to qualify.

Does it matter which lender I choose?

One thing a lot of borrowers don’t realise is how much the lender you choose can impact your loan. First, if you pick a lender you aren’t likely to qualify with, you could end up going through the application process, paying fees, and still have your application denied.

Second, there are numerous factors – in addition to the interest rate – that will impact your mortgage experience such as special discounts and flexible features. This is why it’s so important to work with an experienced mortgage broker who can help you get the most out of your mortgage.

Should I just save enough for a 20% deposit?

This depends. If you can save a 20% deposit, you can avoid paying LMI – which can save you thousands of dollars. You also will be able to qualify for the most competitive loans on the market if you are a blue chip borrower with a good credit history, a high, stable income, and healthy asset and debt ratios.

But, you need to consider how long it will take to save a 20% deposit. While you save, property prices could increase, meaning you’ll need to save even more money to come up with the 20% deposit.

High LVR Loan Basics

When exploring your options for a low deposit mortgage, this information will help you make a better informed decision when comparing loan products and lenders.

10% Deposit and 15% Deposit Loans: What to Expect

With a 10% deposit or 15% deposit, you’ll have more negotiating power as a borrower than you would with less than 10% of the property value saved.

You may be able to qualify with both banks and non-bank lenders so you’ll have a lot of options.
You’ll be able to qualify for the same low interest rate as borrowers with a 20% deposit.
You’ll, most likely, have to pay LMI, which is usually around 2% to 4% of the purchase price.
You’ll have to meet strict lending criteria in order to qualify for the best loans.

5% Deposit Loans: What to Expect

Your options will be limited with a smaller deposit. You may not qualify unless you can meet high standards for credit, income, assets, and personal debts.

Only a few lenders will approve your mortgage application.
You’ll have to pay LMI.
You may end up paying a higher interest rate than what the big banks are offering.
You’ll still have to prove you’re a reliable borrower.

Requirements for a Genuine Savings

With low deposit lending, having a genuine savings is really important. But, what exactly is a genuine savings?

Deposits into a savings account over a 3-month period.
Term deposits, shares, or managed funds held for at least 3 months.
In some cases, lenders will let you use equity you have in another property or a strong rental history to demonstrate your ability to save.

However, the larger the deposit, the more flexible a lender’s genuine savings requirements will be.

With a 5% deposit, you’ll definitely need genuine savings.
With a 10% to 15% deposit, most lenders will want to see a genuine savings.
With a 15% to a 19% deposit, you can qualify with most lenders without a genuine savings.

What About No Deposit Home Loans?

You may have heard of no deposit home loans before – where you can borrow 100% of the purchase price as well as the extra costs of buying a home. While years ago, eligible borrowers could qualify for a mortgage without a deposit, today it’s not possible without some sort of extra security.

There are strategies you can use to get a mortgage without saving for a deposit:

Use a guarantor.
Secure the loan with equity from another property.

How Much Is LMI?

Did you know that LMI premium rates differ from one lender to the next? How much you’ll pay will depend on several factors, including:

A larger loan means a higher LMI premium.
If you are taking out a low doc loan for self-employed borrowers or not.
The set rates of the insurance provider the lender uses.
If you have any negotiating power to get a discount on LMI.

How Do I Find My LVR?

LVR is the amount you have to borrow in relation to the property value. You can find it by dividing the loan amount by the property value.

For example, if you have to borrow $450k to purchase a property valued at $500k, your Loan to Value Ratio would be:

$450k / $500k = .90 or 90% LVR

Can I Get a Low Deposit Interest-Only Loan?

With a 5% deposit or less, you probably won’t be able to take out an interest-only loan. You also won’t be able to get a line of credit loan. However, no matter what size your deposit, once you qualify for a loan, you’ll enjoy the same features and interest rates as a borrower who took out the loan with a 20% deposit or larger.

This is because a low deposit loan isn’t a different type of loan product. It simply refers to a loan you qualified for with a low deposit. If your mortgage product has a 100% offset account, free redraw, and other features, they won’t change because of your original deposit size.

The difference is, you’ll probably have to pay LMI. And, it’s more difficult to qualify in the first place because all lenders have stricter criteria for low deposit borrowers.

Ready to apply for your low deposit home loan?

Get started today. Complete our online enquiry form or speak directly with one of our low deposit mortgage experts by calling (07) 3146 5732.

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No Deposit Home Loans

What if you don’t have a deposit saved but you are ready to purchase a home? There are no deposit home loan options available if you get a little creative with your loan.

What Is a No Deposit Home Loan?

A no deposit home loan, also known as a 100% home loan, doesn’t exist in the traditional sense like it used to. Even the most flexible lender in the mortgage market won’t offer an unsecured 100% home loan.

This doesn’t mean you should postpone your dreams of buying a property just because you haven’t saved up enough for a deposit. Not yet, at least. You may be able to use other means to secure your mortgage.

What Are My No Deposit Loan Options?

Without a traditional deposit, you’ll need to have something else to secure the loan and make offering a mortgage to you less risky for the lender. Here are the different ways you may be able to qualify for a mortgage without a deposit.

Guarantor Loan

This is the most popular way to get a no deposit loan. A lot of first-time homebuyers use a guarantor loan. You may not have had the chance to save up tens of thousands for a deposit but you may still be able to comfortably manage a mortgage. With some help from a guarantor – usually your parents or another close relative – you can make your home buying dream a reality now rather than in a few months or years when you finally have enough for your deposit.

With a guarantor loan:

Your loan is secured with your guarantor’s own property.
You don’t need to demonstrate you have a genuine savings.
You can borrow as much as 105% of the home value, which will cover stamp duty, conveyancing, and other related fees as well as the purchase price.

Home Equity

If you are purchasing an investment property and you already own your own home, you can use your built up equity to secure your loan. This way, you don’t need a deposit, as long as you have enough equity. You’ll still need to have money saved to cover stamp duty, your application fee, and other costs, however.

Personal Loan

This option will only work if you are in an extremely robust financial position:

If you have a high income
Your existing debt is less than $10,000
You have a squeaky clean credit history

You may have a small deposit, which doesn’t necessarily have to be genuine savings

For this borrowing strategy to work, you’ll want to be able to combine a small deposit – such as a 3% or 5% deposit, with your personal loan to reach 20% of the purchase price, or at least more than 15%. This higher deposit will give you more options when you apply for a mortgage.

Gifted Money

Are your parents or other relatives willing to help you buy a home? You’re not alone. More than half of first homebuyers use the money gifted to them by their parents for some or all of their deposit.

You don’t even need a 20% deposit when you use gifted money. With a 10% or 15% deposit, or more, some lenders won’t require you to have genuine savings.

Superannuation

If you have at least $150,000 in superannuation, you can buy a property with a self-managed super fund (SMSF). An SMSF may be a great option for taking out a no deposit home loan in some cases, but this strategy isn’t right for everyone.

It’s complex – you’ll need to work with a financial advisor to set up the fund and to ensure it’s a wise financial move for you.
You can only borrow up to 80% of the purchase price – you can’t take out a high LVR SMSF loan.
It has to be for an investment property, not a home you plan to live in.

The Best No Deposit Option

Of all the options for a no deposit loan, guarantor loans are the most practical choice.

You won’t have to deal with the extremely strict lending criteria of the other options.
You don’t need any money for a deposit.
You won’t have to pay Lender’s Mortgage Insurance.
With good credit and a high income, you can qualify for a competitive loan with a low interest rate.

To protect your guarantor, this type of loan only involves a fixed liability – they only risk the agreed upon amount, not their entire property. Guarantors can also use a term deposit to secure the loan, which means they won’t even have to involve their property.

If someone isn’t willing to act as a guarantor for you, then you may want to pursue other possibilities.

Saving the Deposit Yourself

If none of these options fit your financial lifestyle, your next best option is to save the deposit yourself. Don’t worry, you don’t need to save a full 20% deposit. You can get a low deposit loan instead. However, keep in mind, you’ll need to meet strict criteria to prove you are a reliable borrower and you’ll have fewer lending options the smaller your deposit.

Here are tips to help prepare and to put you in a stronger position as a borrower:

Figure out how much you need to save – aim for at least a 5% deposit, as well as enough for stamp duty and other fees.
Set up a separate savings account and make regular deposits every month.
Work to improve your credit by paying all your bills on time, including your rent. Also, don’t take out any new credit cards or personal loans unless you really need to.
Monitor your credit and rental history periodically to ensure there are no errors.
Keep your day job. Lenders prefer job consistency because it indicates your income isn’t going to change. You don’t want to switch jobs or quit to become self-employed and start your own business right before applying for a loan.
Try to reduce your personal debts as much as possible.

The more you can do to improve your standing as a borrower, the easier it will be for you to qualify for a loan that is close to 100% LVR.

How to Qualify for a No Deposit Loan

With a no deposit mortgage application, you’ll have to meet high standards as a borrower. There isn’t a lot of potential for leniency like there can be with some low deposit home loans.

Clear credit: You’ll need to have excellent credit. If you have a history of late payments or other credit issues, you may want to spend some time improving your credit history before applying.
High income: When you are applying for a high LVR loan, banks will want to see that you can easily service the loan with a high income.
Consistent job: You’ll need to have a permanent, full-time job that you’ve been working in for at least 6 months.
Minimal debts: A bank isn’t going to lend you a no deposit mortgage if it will stretch your finances to their limit. So, you can’t have a lot of personal unsecured debt. Pay off as much as possible before applying.
Property location: With no and low deposit loans, lenders are even more strict about where the property is located – it should be in a major town, a capital city, or a regional centre.
Property type: The type of property also matters. Think standard types like a unit, townhouse, or house. With studios, units in high rise apartments, and other less common properties, you may not qualify, even if you have good credit and a high income.

To find out if you’ll qualify for a no deposit loan, fill out our online enquiry form to learn more.

What Savings Will I Need for a No Deposit Home Loan?

With a no deposit loan, if you have a guarantor, you won’t require a genuine savings. Even better, if you are a first homebuyer, you can take advantage of the First Home Owners Grant, or FHOG, which will cover all or nearly all of your home buying costs, like stamp duty and conveyancing fees.

Depending on if this is your first home purchase or not and the type of mortgage, there may be other savings goals you’ll want to meet so you aren’t thrown off by unexpected or overlooked costs.

Investment loans: If you are purchasing an investment property, even if it is as a first homebuyer, you’ll have to cover stamp duty and all purchasing costs yourself. The government grant is only for owner-occupier loans. Plan to save about 4% of the purchase price to cover these costs, plus your deposit.
Construction loans: With a guarantor loan, you can take out a construction loan to build your first home. However, it’s a good idea to have around $5k saved to help cover costs in case your construction project goes over budget.
Second owner occupier-loan: If you aren’t a first-time homebuyer, such as if you are moving to a new house, you won’t be eligible for the First Home Owners Grant. You’ll need to save enough for purchasing costs and stamp duty.

No Deposit Loan FAQs

Can I use a no deposit loan to consolidate debts?

One of the perks of a mortgage is you can use the lower interest rate to consolidate your other debts like credit cards and a personal loan. But, the only way you can borrow more than 100% of the purchase price – so you’d have enough for the property, purchasing costs, and your debts – is if you have a guarantor. With a debt consolidation loan with a guarantor, you can borrow up to 110%.

Do no deposit loans have different features than other loans?

You can borrow 100% and qualify for the same loan products as a borrower with a 20% deposit when you have a guarantor. That means, if you are looking for features like a 100% offset account, flexible repayment options, fixed interest rates, and other options, you’ll be able to get what you want out of your loan product, even without having actually saved for a deposit. Just keep in mind, you’ll have more options the more you can demonstrate you are a reliable borrower.

You can’t, however, get a line of credit loan with a no deposit mortgage application. However, you can always refinance in a few years to change loans if you want.

Is it smarter to just save for a deposit?

The answer to this question depends on several variables. Look at these factors to help you decide if you should focus on saving or talking to your parents or other relatives about becoming a guarantor for a 100% loan:

If you can save a large deposit in about six months, it may be worth waiting.
You’ll have to pay LMI with a low deposit loan (a deposit that's less than 20% of the purchase price). You can avoid LMI with a no deposit loan with a guarantor.
In a market with rising prices, you’ll need a bigger deposit and you could end up paying thousands (or tens of thousands) more in capital gains – a guarantor loan with no deposit may be a better option than waiting to save.
In a market with decreasing or stable prices, you may be better off saving for a deposit if organising a guarantor isn’t a preferred option for you.

You can talk to a local realtor to get an idea for which direction prices are moving in your area. To gain some much-needed clarity, don’t hesitate to call us on (07) 3146 5732 or fill out our online enquiry form.

Will I end up with a high interest rate?

No deposit loans don’t have to come with high interest rates. In fact, with a guarantor, there are many lenders who will be willing to offer incredibly competitive interest rates. Some will even waive your application fee or offer other incentives.

The fact is, different lenders will have different preferences. Some are very risk adverse and will avoid most high LVR loans. Others regularly lend to borrowers with a low deposit or no deposit and are willing to offer an attractive mortgage with a low-interest rate in order to gain your business.

As mortgage brokers with more than a decade in the industry, we know what different banks prefer as well as when particular lenders are aggressively marketing to a certain type of borrower. Contact us today and we can help.

How much is LMI?

LMI premiums vary. The size of your mortgage is the biggest determining factor. LMI premium rates are based on what bracket your loan is in. For a small loan, under $300k – LMI will cost closer to 2% of the loan amount. Above $500k, you’ll pay around 4%.

How can I avoid LMI?

With a guarantor, you can avoid paying LMI – which can save you thousands of dollars. Here’s what you need to know:

Not all lenders will allow you to borrow the full purchase price and waive LMI, even with a guarantor. A lot depends on your characteristics as a borrower.
You can avoid LMI if you can come up with at least 10% of the purchase price as a deposit if you work in certain professional fields and have a low-risk application.

How many lenders offer no deposit loans?

You can get a no deposit loan from both bank and non-bank lenders, including NAB, St. George Bank, ANZ, Homeside Lending, and Westpac. But, only if you have a guarantor. There are fewer lenders who will approve a 100% loan application with the other no deposit loan strategies like using a personal loan or superannuation.

How to Apply for No Deposit Loans

Because no deposit home loans are more complicated, it’s not easy to figure out the best route to take when applying for a mortgage. These are some of the questions you'll need to answer:

Should I get a no deposit loan or save?
Am I a good candidate for SMSF loans or using a personal loan for the deposit?
What is the best way to avoid LMI for me or am I better off paying it so I can enter the market sooner?
Currently, which lenders are offering attractive no deposit loans?
Will a no deposit loan work for my investment strategy?

There are also a few important drawbacks you need to be aware of with no deposit loans.

You may have to pay a higher interest rate.
Lenders will expect you to meet strict lending criteria.
Your repayment amounts will be high because you are borrowing the full purchase price – make sure you are comfortable with the amount you’ll owe every month.

But, the good news is, when you understand what’s involved in terms of costs and lending criteria, and you have a plan in place to make the most of your no deposit loan, this can be a practical way to get a great home loan. You can start paying down your mortgage soon instead of struggling to save while paying rent. And, with the benefits of a guarantor loan, you can still qualify for low-interest rate and get all the features you want from your loan without having to pay LMI.

Are You Thinking of Applying for a No Deposit Loan?

Contact us today and we can help you with your no deposit home loan. We can also help you to get ready to apply for a mortgage in the future if you aren’t ready now.

Our mortgage specialists have years of experience with no deposit borrowing, guarantor loans, low deposit loans, and more. Call us on (07) 3146 5732 to get started.

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Australian Expat Home Loans

If you are living and working overseas, you can still get a home loan in Australia. Find out everything you need to know about Australian expat home loans.

How Do Expat Home Loans Work?

If you are an Australian citizen or permanent resident and you live overseas, you can take out a mortgage for up to 90% of the property value. If you are an Australian citizen living in New Zealand and want to buy an investment property, you can get a 90% LVR loan.

For self-employed borrowers, things work a little differently. You’ll be able to purchase a property in Australia when you live and work abroad buy you’ll only be able to borrow 80% of the property value and you'll have to include plenty of documentation to verify your income. Some lenders will only let you borrow 70% when you are self-employed.

Keep in mind, not all lenders will have the same flexibility for expat home loans. Some will have strict lending criteria while others will want to see higher deposits for some borrowers. We also work with lenders who make interest rate discounts available to overseas borrowers. You do have options as an expat, you just have to know where to look.

General Restrictions on Australian Mortgages for Expats

There are several factors you should know about that will impact your ability to qualify when you apply for a mortgage:

If you earn a foreign business income, only a small number of lenders will approve your mortgage application.
The currency of your income also matters – different banks accept different currencies.
Because some lenders allow for large exchange rate variations, your borrowing power could be far less than you expect.
If you are married to a foreign citizen, some lenders will deny your application.
A lender may use Australian tax rates rather than the tax rate of the country you live in, which can limit your borrowing power.
Most banks will expect you to have a Power of Attorney (POA) set up with someone in Australia.

Which Currencies Do Banks Accept?

The more common the currency, the more options you’ll have when choosing lenders. The following are the currencies most banks will accept from Australian borrowers who live overseas:

Euro (EUR)
United States Dollar (USD)
Great Britain Pound Sterling (GBP)
Canadian Dollar (CAD)
Hong Kong Dollar (HKD)
Swiss Franc (CHF)
Singapore Dollar (SGD)
New Zealand Dollar (NZD)
Japanese Yen (JPY)
Chinese Renminbi (CNY)

We can help you find lenders who will accept other currencies. There are some that will but they may have extra restrictions such as no low deposit loans and high borrowing standards for income, credit, and asset ratios. You’ll also likely have to pay LMI. With foreign currencies, banks also tend to change their policies periodically.

If you aren’t sure if the currency of your income will be accepted, call us on (07) 3146 5732. We can help.

Do Expats Have to Pay Higher Interest Rates?

As an overseas borrower, you do present more risk to banks. This is why you’re likely to have to pay LMI as an expat unless you have a large deposit. Living overseas doesn’t, however, mean you’ll have to pay a higher interest rate. Avoiding higher rates is often a matter of shopping around for the right lender.

We work with numerous specialist lenders who regularly offer expat loans to Australians living abroad. We can help you find the most appropriate lenders for your situation and can even negotiate for a better interest rate to help you get a better deal on your mortgage.

How Much Do I Need as a Deposit?

As an expat, you will only be able to borrow 90% of the property value, however, in some cases, you can borrow more. As a minimum, make sure you have a 5% deposit ready plus enough to cover purchasing costs. With such a small deposit, it needs to be your genuine savings rather than a lump sum gifted to you or money from an inheritance. So you’ll want to make deposits into your savings account for at least 3 months.

If you have a larger deposit, you probably won’t have to provide a genuine savings. You’ll still have to pay LMI though unless you have more than a 20% deposit.

What if you don’t have a deposit saved but you are ready to purchase a home? You can qualify for a mortgage without a deposit if you have a guarantor. For example, your parents can use their Australian property to guarantee your loan.

How the Tax Rate Your Lender Uses Impacts Your Loan

When the bank determines if you can service the loan with your income, they will look at the tax rate to estimate what you’ll take home after tax. When you live abroad, the country you live in is likely to have a lower tax rate than Australia does. Aussie tax rates are some of the highest in the world.

If you apply for a mortgage with a lender who uses the Australian tax rate, your estimated after-tax income will appear to be smaller than it is in the country you are living in. This makes it harder to qualify because it shrinks your income on paper.

In order to avoid the Australian tax rate, you’ll have to:

Find a lender who will use the foreign tax rate.
Live in one of the countries that qualify.
Show where your tax is withheld on your payslips.

If you are an expat trying to qualify for an Australian mortgage, call us on (07) 3146 5732 or fill out our online enquiry form today. We know which lenders will use a foreign tax rate for expat home loans.

Understanding Your Borrowing Power as an Expat

It’s not just the Australian tax rate that will lower your borrowing power as an expat. Because of a variety of factors, you could end up with limited borrowing power.

Lenders will usually only use a percentage of your income after they account for factors like exchange rate fluctuations and loaded repayments on foreign debts. Often, they will only use 60% to 90% of your income. This is something you should keep in mind when considering how much you may be able to borrow as an expat.

With the exchange rate, your lender will use their own rate. Bank exchange rates tend to be more conservative than the market rate. This will effectively reduce your listed income on your home loan application.

Borrowing with More than One Currency

Earning an income in more than one currency when you live abroad won’t make or break your application. As long as each currency is in your lender’s preferred or secondary currency lists, your foreign income can be included.

What your lender will do is apply that conservative exchange rate to each of the currencies, which like mentioned before, limits your borrowing power.

Power of Attorney for Expat Loans

Your lender may require you to have a Power of Attorney (POA). Even if you don’t have to have a POA set up, you may want to anyway.

With a POA, someone you trust, such as a family member, friend, or a solicitor can save you a lot of hassle when it comes to managing legal and financial documents for your mortgage, and for the property. When you give someone Power of Attorney, they can sign documents on your behalf.

However, as no lender is the same, the POA requirement is going to vary from one lender to the next.

Some lenders will have specific requirements for a POA. For example, you may have to use a solicitor or a close relative instead of a friend.

Other lenders won’t accept a POA at all. This means you’ll have to have the documents mailed to the Australian embassy or consulate in the country you are residing in. You’ll have to then sign the documents at the embassy with an official witness.

What You Need to Know About Using the Australian Embassy for Your Home Loan

Visiting the Australian embassy is going to become a part of the process of taking out an expat home loan, whether your lender accepts a POA or not. No matter what, you’ll have to have your ID certified there before you can turn in your application.

If you can’t use a POA because your lender won’t accept documents signed by someone else, you’ll have to sign your loan documents with a witness at the embassy or consulate.

Keep in mind, you’ll need to pay a fee every time you go to sign documents in front of a witness. This service can cost a hundred dollars or more each time. Fees will vary from one country to the next. To make sure you are prepared and know what to expect, you can call the consulate before getting your loan application together and ask what they charge. Then, factor this cost into your estimate for how much you’ll need to save for your mortgage.

What If I’m Married to a Foreign Citizen?

If you are planning on applying for a mortgage with a foreign citizen, it’s important to be careful in choosing a lender. This is actually common with expat loans. If you live and work overseas, you may have married someone from outside of Australia. Or, you may be in a de facto relationship.

In this case, lenders can look at your application in different ways.

They may assess you and your spouse or partner as Australian citizens. This would simplify your loan application and make it easier for you to qualify for the loan you want.

Another possibility is they will assess both of you as foreign investors. This will mean you’ll need a larger deposit and the lender will only look at a fraction of your income, reducing your borrowing power. You may also have to pay a higher interest rate.

Other lenders will take the highest income earner’s nationality and use it to assess both of you.

Will Lenders Look at My Foreign Partner’s Salary?

Not usually. If your partner isn’t an Australian citizen or permanent resident, they’ll typically ignore their income.

There are ways to get around this if you find the right lender and if your partner can meet certain criteria:

They live in Australia;
You are married or have been in a de facto relationship for at least 2 years;
You have children together;
They have a valid visa;
You are the primary income earner.

Can I Qualify as a Self-Employed Borrower?

Working abroad as an expat and being self-employed makes it difficult to qualify for a mortgage. This is because it is hard for banks to verify your foreign income because you don’t have traditional payslips from an employer like a PAYG income earner.

There are a very limited number of Australian lenders who will work with a self-employed expat. The only way to qualify with them is if you have a large deposit – you may be able to borrow up to 70% to 80% of the property value. You’ll also need to have been self-employed for at least 2 years. Your lender will require extra documentation to help them verify your income, including business bank statements, 2 years of personal and business tax returns, and an official letter from your accountant.

Does the Foreigner Stamp Duty Surcharge Apply to Expats?

Foreigners buying property in Australia have to pay a surcharge on stamp duty. This also means, if you purchase a home with your foreign partner, you could have to pay the surcharge.

Australian expats aren’t subject to this surcharge. If you are an Australian permanent resident living abroad, you may have to pay it. It’s a good idea to check with the state revenue authority for the state or territory where your property is located to find out ahead of time.

The Secret to Qualifying for an Australian Mortgage as an Expat

With Australian expat home loans, you can have a completely different experience from one lender to another. There are simply too many factors that go into determining eligibility. And then each lender uses their own approach for each factor, creating even more complexity.

Something as seemingly minor as the foreign exchange rate your lender uses could lower your borrowing capacity enough to stop you from getting a loan you could easily qualify for with another lender.

The lender you choose can also impact your interest rate, whether you have to pay LMI or not, the size of the deposit you’ll need, and if you’ll have a chance of qualifying at all.

However, with an experienced mortgage broker to guide you through the process, uncovering the right lender for your situation becomes a lot easier. For expat home loans, contact us on (07) 3146 5732 to talk to one of our experts or fill out our enquiry form online. We have more than a decade of experience helping Australians, including those who live abroad, to qualify for a competitive loan.

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Guarantor Loans

With years of rising property prices in Australia, guarantor loans have become more common. They don’t just make it easier to buy a home. For many, organising a guarantor is the only realistic way to enter the property market.

One out of every 5 Australians receives help from family when buying a home, whether it’s help paying for the deposit, covering the extra costs associated with getting a mortgage, or a family member acting as a guarantor. If you are ready to buy a home, a guarantor loan may be a great option. Read on to find out more about guarantor loans in Australia.

Why Are Guarantor Loans So Popular?

Guarantor loans make competitive mortgages accessible to more borrowers. This is because you don’t need to have saved up a large deposit. Even without a deposit, you can borrow anywhere from 100% to 110% of the property value, depending on the type of loan you are applying for.

Also, with a guarantor, it’s possible to qualify for low rates, full-featured loan products, and you won’t have to pay LMI. With these benefits, you can save thousands on your mortgage.

How Much Can I Borrow with a Guarantor?

You’ll still need to meet your lender’s criteria and demonstrate you are a reliable borrower. As long as you do, you can borrow the full purchase price and more to help you take care of costs related to your loan like stamp duty and conveyancing, or you can consolidate your debt.

First-time homebuyers can borrow 105% of the property value.
When refinancing with a guarantor loan, you can borrow 100%.
With a construction loan, you can borrow 105% of the land value plus the cost of construction – just make sure you also save an extra $5k in case your project goes over budget.
For an investment property, you can borrow 105%.

When a guarantor uses their property or other assets to secure your mortgage, the bank doesn’t have to take on very much risk. Presenting less risk opens up a lot of doors to you as a borrower.

Interested in seeing if you qualify for a guarantor loan? Call us on (07) 3146 5732 or fill out our online enquiry form today.

What if You Aren’t a First Homebuyer?

Surprisingly, you’ll have a hard time finding a lender that will offer a guarantor loan if you are purchasing your second home. Even though there are different reasons someone may need to purchase their second home that aren’t related to a credit or financial reliability, most banks take a black and white approach to second homebuyers. In their eyes, if you already purchased one home, you should have enough assets to be able to purchase a second home without a guarantor.

In reality, life changes like moving for work, divorce, or totally uncontrollable factors like a serious illness, can lead someone to sell their first house and then have to re-enter the market as a second-time homebuyer.

There are lenders who are willing to approve a guarantor mortgage application for borrowers who are on their second home, depending on the details of the situation. Contact us today if you need any help with qualifying for a guarantor loan as a second homebuyer.

The Basics of How Guarantor Loans Work

With a guarantor loan, it’s not just you who is involved in the mortgage, but your guarantor as well. You’ll have to find someone who is willing to help you with your home loan and use their assets as a security. This is why most guarantors are the borrower’s parents.

Your parents probably have enough equity in their own property, or they may have another asset they can use like a term deposit, to make it easy for you to take out your loan. As long as you pay your mortgage repayments on time, all they have to do is act as a guarantor. Also, once you’ve paid off enough of your loan, they don’t have to be your guarantor any longer, which takes any financial responsibility off of their shoulders.