Australian citizens living in London are frequently employed on a contract basis. They could be working for themselves, a limited company, or an umbrella corporation. Furthermore, these limited corporations are often established offshore in the Canary or the Virgin Islands to lower the contractors’ UK tax liability.
Being a returning expats to Australia generating income abroad mixed with being employed on a contract basis, which is often not viewed as the most reliable way to work by banks, can make getting a home loan approved extremely challenging. This article examines when you might be supported, as well as what lenders consider when considering whether or not to approve your house loan.
The prerequisites for becoming approved as an Australian Contractor working in another country
Before considering giving mortgage credit to contractors living and working abroad, most lenders would want to see 2 years’ worth of tax returns and financials. The banks will use these financials to assess your taxable income, which will determine your borrowing ability. If you contract and run your business through limited corporations, your taxable income will be modest as you may be paid in dividends or loans.
However, a few lenders would lend to contractors who live abroad and calculate their income based on the contract and bank statements rather than tax reports. Rather than just looking at the tax returns, these lenders will trace the money trail. Applications must show/provide the following information to be approved for home loan financing with these lenders:
- If the contract is for less than a year, the contractor will typically be required to submit documentation of past agreements to demonstrate a satisfactory track record of contract work,
- 6-12 months of bank statements will be required to verify that the income was received and deposited into the contractor’s bank account,
- 6-12 months of bank statements for the business account,
- Invoices, employment contracts, and any other documents that can be used to prove income.
In addition, Australian expat contractors will require the following:
- Credit history free of defaults or bankruptcies (telephone and electricity defaults can be assessed on an individual basis),
- Possessing a positive asset position (i.e., your assets exceed your obligations),
- Your asset position is acceptable for your age and income (i.e., the older you become, the more assets you should have),
- Expat contractors will often be needed to put down a 20% deposit; however, in very rare situations, contractors living and working overseas may be able to obtain an LVR of more than 80%.
If you’re a returning expats to Australia living and working in London, such as an IT or banking contractor, you can acquire a home loan even if you’re using a tax-efficient structure. Obtaining permission can be difficult, but if you have the above information, you should purchase your property of Australian investment.