Can you get a home loan with foreign income?

Foreign-income home loans have the same functions as standard home loans. The primary difference between the two home loan types is that the former is designed for buyers whose primary source of income is in one or more foreign currencies. Lenders often attach stricter terms and conditions to foreign-income home loans due to factors like fluctuations in international currency and exchange rate expenses.

Each lender will set the maximum amount they’ll allow you to borrow based on a range of factors. International tax rates, currency fluctuations, and any overseas debt obligations will all affect the loan amount. Lenders will usually convert your foreign income to Australian dollars and then reduce it by 10 per cent to account for currency fluctuations. Also, some lenders may also only consider 80 per cent of your foreign income when determining the loan amount.

Depending on the lender, the loan-to-value ratio (LVR) can range between 60 per cent and 80 per cent. Therefore, if you’re an ex-pat or an Australian living in the country but earning in a foreign currency, you’ll need to save a much higher deposit to buy a property.

You need to provide the lender with some documents to prove your foreign income. Generally, lenders accept payslips from first-world countries like the US or UK or Europe. If you’re self-employed, lenders may accept certified tax returns as proof of income.

If you’re salaried, the documents you’ll need to provide to prove your income include the following:

• Two payslips
• Three months’ worth of bank statements
• Previous year's tax returns
• An employment letter from your employer explaining your employment

If you’re self-employed, the following documents are required:

• Two years’ worth of tax returns
• A verification letter from your accountant if you don’t have sufficient tax returns

The documentation requirements may also vary based on the tax system adopted by the country which you earn the foreign income from. Lenders may also evaluate your financial documents under the domestic tax system. 

The exact requirements could vary depending on lenders, and it’s worth checking with your mortgage broker or lender about any additional documentation you might need. These additional documents may include copies of your passport and visa or work permit showing that you can live and work abroad if you live overseas. 

It’s also important to know that most lenders will need the documents in English. If your financial documents are in a foreign language, you’ll require an interpreter’s certificate, an official document translating the original documents to English and for them to be duly certified.

The translation must be done by a recognised organisation with due authority, including approved domestic translators or qualified translators living abroad. Getting the interpreter’s certificate from the local Australian consulate is advisable, as the staff can identify and translate your financial documents.

Your foreign income may be reliable and steady; however, the foreign currency you earn your income can impact a lender's decision. Some lenders may be less willing to provide a home loan due to the volatility or scarcity of some currencies. Stable and common currencies are considered safer by lenders. The LVR a lender will allow can also be impacted by the currency in which you earn income.

How hard you may find getting a foreign income home loan also depends on your financial status. Like a standard home loan, lenders will look at what you have available to use as a deposit, your credit history and the reliability and stability of your income.