Implications on Your Australian Mortgage When Becoming an Expat – For many Australians relocating overseas, the decision about their primary residence back home is paramount.
Often, the choice is to convert it into an investment property. One of the most pressing concerns is how this conversion impacts their mortgage.
Here’s a deeper dive into the mortgage-centric implications:
- Interest Rates Adjustments
Potential Rate Increase: Banks and lenders often perceive investment properties as riskier compared to owner-occupied properties.
This perception may result in a hike in interest rates when converting from a home loan to an investment loan. Australian expats should be prepared for a possible adjustment in their mortgage rates, which can significantly impact their monthly repayments and overall loan cost.
- Reassessment of Loan Terms and Conditions
Review of Loan Agreement: Changing your property’s purpose could prompt your bank to revisit your loan’s terms and conditions.
Although the core terms may remain the same, certain specifics tailored to owner-occupied properties might be altered to reflect the nature of investment properties.
- Loan to Value Ratio (LVR) Considerations
Potential LVR Changes: The Loan to Value Ratio is pivotal in determining the risk associated with a loan. If you’re on the cusp of your lender’s acceptable LVR for a home loan, the transition to an investment property might necessitate additional evaluations.
This could lead to requirements for mortgage insurance or even a restructuring of the loan in certain scenarios.
- Bank Approval and Associated Fees
Consent Requirement: Before transitioning from a home loan to an investment loan, it’s essential to notify and obtain consent from your bank or lender.
While approval is often granted, it might come with administrative fees or other associated charges.
Refinancing Options: Given the potential changes in loan terms or interest rates, some expats might consider refinancing their mortgage with another lender offering better investment loan rates or terms.
However, refinancing can come with its own set of fees, so it’s vital to weigh the long-term benefits against the initial costs.
- State-based Charges and Implications
While primarily a concern for tax and property management, some state-based charges, like land tax, might indirectly affect the overall cost considerations for Australian expats transitioning their mortgage.
The transition of a mortgage from a principal place of residence to an investment property for Australian expats entails multiple considerations, predominantly around interest rates, loan terms, and potential fees.
It’s imperative for expats to engage in discussions with their lenders and seek advice from mortgage brokers to understand the full range of implications and make an informed decision.