Looking for a home loan in Australia while you’re an Aussie citizen living in France? This article breaks down the specific things you need to know and offers solutions designed for you. We’ll talk about the home loan process for Australian expats and answer some of your frequently asked questions. At Home Loan Experts, we know it’s not straightforward, and we’re happy to help you figure it out and find the property for you.
How Much Can I Borrow?
- Australian citizens and permanent resident (PR) visa holders living in France may be able to borrow up to 90% of the property value.
- You can qualify for the same interest rates as an Australian citizen.
- Self-employed borrowers may be able to borrow up to 80% of the property value.
- Loans are available for purchase, refinance, investment property or to buy a house and land package.
- If you’re a dual citizenship holder or you’re married to a French citizen, some lenders may unfairly treat you as a foreigner. So, choosing a lender that favours expats is essential to borrowing at the maximum Loan-to-Value Ratio (LVR)
- A Power Of Attorney (POA) in the name of a solicitor or family member is required by some banks.
Our mortgage brokers specialise in mortgages for Australians in France. They know which lenders are more lenient and flexible towards Aussie expats.
You can call us on 1300 889 743 (+61 2 9194 1700 if you’re overseas) or complete our free online assessment form to speak with one of our mortgage brokers.
Can Australian Expats Living In France Get A No-deposit Home Loan?
Generally, you’ll need a deposit of at least 5% of the property value. On top of that, you’ll need around 5% more to prepare for other property purchase costs such as stamp duty.
This means most lenders expect you to have a 10% deposit.
Not only that, most Australian banks prefer your deposit to be saved as genuine savings. Typically, banks consider genuine savings as money you’ve saved or a deposit held in a bank account for at least 3 months.
However, no deposit home loan solutions are available!
Using a no deposit home loan, you won’t need genuine savings. You won’t even need a deposit at all if you have a guarantor.
This can also help you avoid Lenders Mortgage Insurance (LMI). Lenders generally charge LMI LMI when you borrow more than 80% LVR. The LMI premium can amount to thousands of dollars so a guarantor loan is a great way to save on this cost.
Will I Pay A Higher Interest Rate?
Despite technically being non-residents, Australians in France are still Australian citizens.
What this means is that most banks offer you the same home loan interest rates as those living and working back home.
You can even qualify for the same interest rate discounts. However, we can help negotiate an even bigger discount that’s below the Bank Standard Variable Rate (BSVR).
What Is The Home Loan Process For Australian Expats?
The home loan process in Australia for Australian expats is as follows:
- Set up Power Of Attorney: Some lenders will require you to arrange a Power of Attorney. This allows a trusted individual to act legally on your behalf in property-related matters.
- Eligibility Assessment: The lender will determine your loan eligibility, considering factors like your overseas income, which may be shaded, depending on the currency in which you earn (see “What Is Income Shading And How Does It Work?” below), the exchange rate, and your employment status and credit history. You will also be required to provide evidence of your residency status/visa for the country in which you are residing, such as a work visa or residency permit. It’s important to note that if you have investment properties in France, lenders will typically count 80% of the gross rental income from them, minus rental expenses, when assessing your borrowing power.
- Document Collection: Gather necessary documents, including proof of income, employment details, and identification. Specifically, you are required to provide payslips from the last 3-6 months and cheque account statements that highlight salary credits during the same period. If you are a tax resident of any country other than Australia, you will need to provide your Tax Identification Number for each of those countries.
- Loan Selection: After your loan has been serviced, you choose the right home loan type to suit your financial situation.
- Pre-Approval: Obtain a loan pre-approval to be sure of your borrowing capacity and enhance your position as a buyer.
- Property Search And Offer: Search for a property within your budget, make an offer, and proceed to sign the Contract of Sale. You can use the services of an Australia-based buyer’s agent to help you with your property search.
- Final Loan Approval: After property valuation and approval of terms, you will receive final loan approval from the lender.
- Settlement: Complete the legal transfer of property ownership. Your conveyancer or solicitor typically manages this process, liaising with the seller’s representative to ensure a smooth transaction. After that, you will start making your loan repayments.
This process involves steps specific to expats, such as additional documentation for foreign income, making professional advice from a mortgage broker particularly beneficial. At Home Loan Experts, we handle each detail with care, drawing upon our hard-earned expertise to make things easier for expats.
What Is Income Shading And How Does It Work?
Income shading means that lenders don’t take your entire income at face value when determining your loan eligibility. Lenders are conservative when they calculate your income as an expat. They will use your net income and shade it to 80%.
As an illustration, suppose you earn an annual gross income of €80,000, with France’s income tax rate in that bracket being 41%. This results in a net income of approximately €47,200. Australian lenders often apply an 80% shading to this net income after converting it to A$.
Using the exchange rate of A$1 equals €1.65: Income in A$1 = €47,200 x 1.65 = A$77,880
Subsequently shaded by lenders: Shaded Income in A$ = 0.8 x A$77,880 = A$62,304 This will be the amount that most lenders will service for your loan. At Home Loan Experts, we have relationships with lenders that consider 100% of your gross income. Contact us today at +61 2 9194 1700 or fill in our free online assessment form.
Disclaimer: The income calculations provided above are based on a simplified example and are for illustrative purposes only. Actual loan assessments may involve additional factors, and individual circumstances can vary. Consult with financial professionals or lenders to obtain accurate and personalised information.
Is It Tough For Australians In France To Get Loan Approval?
The main hurdle Australians in France may face is proving foreign income. This is even more so if you earn in a foreign currency that most Australian banks may not accept.
The Euro is one of the most common currencies that lenders deal with. As long as you earn a living in Euros, you have a good chance of getting approved.
However, many Australian banks don’t accept CFP Franc.
You may find it tough to qualify if you earn in CFP Franc or any other currency that’s not on the Australian Expat Mortgages page. You may still get approved but some conditions may apply such as not being able to borrow over 80% LVR.
Do I Need Approval From The Australian Government?
If you’re an Australian expat in France, then you don’t need Foreign Investment Review Board (FIRB) approval when buying a property in Australia.
The approval is only required if you’re a foreign citizen who would like to invest or buy a home in Australia.
You also don’t need FIRB approval if you’re an Australian permanent resident.
What if I’m married to a foreign spouse?
You won’t need FIRB approval even if your husband/wife or de facto partner is a foreign citizen.
Can I Avoid The Foreigner Stamp Duty Surcharge?
Yes! Australian citizens living in France are exempt from stamp duty and land tax surcharges that have been introduced to almost all states across Australia.
That’s because expats are, for all intents and purposes, still considered Australian citizens, even if they’re non-residents.
The caveat to this rule is if you’re buying with a partner who is not an Australian citizen.
If their name is on the property title, you can still be hit with the foreign citizen surcharge.
To avoid paying potentially thousands more in tax, you may want to consider having just your name on the property title.
On top of this, some states may actually require you to be in the country at the time of contract exchange.
Check out the foreign citizen stamp duty page for more information and seek guidance from your relevant state revenue office.
Can I Apply With A Big Four Bank?
You must meet standard bank lending policy to get approved with a big four bank. It may be tougher if you have a spouse who isn’t an Australian citizen or permanent resident.
Please note that a big four bank may not approve your loan if you’re borrowing over 80% LVR. However, with a strong application, you may be able to borrow up to 90% with a major lender instead.
Can I Buy A Commercial Property?
Non-residents are actually restricted to buying either a new property or vacant land. However, this is not the case for Australians in France.
Since you’re an Australian expat, commercial properties are available for purchase. You can even buy an existing (established) property.
Please note that depending on the type of property, you may have to meet additional lending criteria. This can include having a bigger deposit, higher interest rates or lower loan size.
Can Australian Tax Law Be An Issue?
Australians in France won’t have to pay double the tax due to a Double Taxation Agreement (DTA).
However, please note that even if you’re treated as a normal Australian citizen, Australian tax law can be an issue. For example, the tax treatment is more important if you’re buying for investment purposes.
To learn more about the tax implications of buying in Australia, you can check out the Australian Taxation Office (ATO) website.
What If I Can't Prove My Income?
In most cases, you’ll need your two most recent payslips to prove your foreign income. You can also use your tax returns for the last two years.
If you’re borrowing 80% or less, some lenders may even accept a letter from your employer.
However, we understand that you may not have full financials if you’re a contractor or you run your own business.
If you can’t prove your income, you can go for a low doc or a no doc home loan.
Applying With The Right Lender Is Key!
You can get approved for a great deal by applying with the right lender. However, finding the right lender for your specific situation may be difficult.
This is where we come in. Rooted in care, we understand the importance of finding the perfect lender customised to your needs. We have relationships with almost 40 different lenders all over Australia. In most cases, we can also help negotiate a great price as well!
You can speak with one of our credit specialists by calling us on 1300 889 743 (+61 2 9194 1700 if you’re overseas). You can also fill in our free online assessment form and one of us will contact you instead.