Investing in Australian Property? Mortgage Guide for Foreign Investors


Australian property has been popular with foreign investors for many years. But, in 2016, many of the Australian banks tightened their lending criteria for foreign investors or withdrew from the mortgage market completely.   

The good news is that if you’re thinking of buying an Australian property, the mortgage market has eased and finance is now far more readily available, particularly if you’re buying property in Sydney, Melbourne or Perth. 

Australian Property – Mortgage Guide for Foreign Investors

The type of mortgage you chose (interest only or principal and interest), the number of years you take the mortgage out for (the term), the deposit you have available and the interest rate will all impact the performance of your investment. 

These are our quick hints and tips:

  1. Always week the advice of an independent mortgage firm that specialises in mortgages for those buying overseas properties.  They should have access to lenders in your own country, in Australia and other jurisdictions and provide you with the most choice. 
  2. Run different investment analysis scenarios so you have a clear indication of the how the mortgage variables will impact the performance your investment and your long term investment strategy.
  3. Foreign investors must make sure they start the process 4-6 months BEFORE settlement (completion) of the property.  Mortgage applications for overseas purchases typically take longer than for domestic buyers.
  4. Generally, the more deposit you have, the lower your Loan to Value (LTV) and the lower the interest rate you’ll pay.
  5. Most lenders typically offer LTV’s of around 60-70%, meaning you’ll need a cash deposit of at least 30% to 40%.
  6. Investor mortgages typically carry a higher interest rate than residential mortgages, but the lower the LTV the lower the interest rate.
  7. Minimum loan amounts are generally AUD200,000 and can be obtained in Australian dollars or your local currency (borrowing in Australian dollars is more common).
  8. Most of major Australian institutions lending do not require the foreign investor to visit Australia to process the application.
  9. Foreigners earning Hong Kong Dollars and Singapore Dollars may have their income assessed using Hong Kong and Singapore Tax rates, meaning you may be allowed to borrow more.
Australian Properties - apartments and houses along shoreline of Sydney Harbour
Properties on the shoreline of Sydney Harbour

Key terms and phrases

Investor mortgages  – In Australia, mortgages for investment property are referred to as ‘buy-to-let’ mortgages.

Official Cash Rate (OCR) – The Australian central bank’s rate of interest.

Loan-to-value – the ratio of the loan to the value of the property.

Interest only – you only pay the interest each month, not the capital you have borrowed (you pay back the capital at the end of the mortgage term).

Principal and interest (repayment) –  you pay back some of the capital and the interest each month.  At the end of the term you will have repaid the entire loan.

Fixed rate mortgage – a fixed rate of interest over a specified period, usually deferring to the banks Standard Variable Rate at the end of the term, if a new mortgage is not arranged. Your next mortgage can be arranged with a different lender at the end of the term.

Variable rate- the interest rate could go up or down depending on the OCR.

Tracker – set at a fixed percentage above the Bank of England base rate for the term of the loan – these are not common in Australia.

Remember, always seek the advice of an independent mortgage broker. Foreigners should use independent mortgage brokers who are experienced in assisting overseas buyers.

We hope you found this article useful if you are thinking of investing in Australia. You may be interested to read our guide to the purchase process for off the plan Australian Property here.

Important notice:  Proptech Pioneer and its associated companies seeks to provide investors with guides, information and tools, but we cannot guarantee this information to be accurate or perfect.  You use the information at your own risk and accept no liability if you rely on this information.   Proptech Pioneer is not a tax advisor, conveyance, lawyer or financial advisor or mortgage advisor.  You should seek independent advice from independent professionals before making any investment decision.