Table of Contents
So you’re an Australian citizen or permanent resident living and working overseas. You earn in another currency, and you want to borrow for a property back home.
How much you can borrow (and therefore the property you can afford) comes down to how your lender assesses your foreign income, sometimes called overseas income. The technical term is income shading, a mortgage assessment method where lenders discount your foreign income by 0% to 40% to hedge against currency fluctuations and exchange risks.
In this guide we’ll cover
- what income shading is, and why it decides your borrowing power
- how lenders read different income types, from salary to bonuses to self-employment
- why the currency you’re paid in matters
- the borrowing-power gap between lenders, and why it’s so wide
- how to get your income assessed favourably before you apply
Why Income Shading Is Key To Expat Loan Servicing
Income shading is often the single factor that is most material to an expat loan. The lender takes your gross foreign income, converts it to Australian dollars, then counts only a portion of it when working out what you can borrow.
The reason it matters so much is that borrowing power is built on the shaded figure, not your real salary. You might earn well by any measure, yet borrow as if you earned less, purely because of how the lender treats the income.
Across the market, shaded figures generally land somewhere between 60% and 100% of gross, depending on your income type, your currency, and the lender. That’s general market practice rather than a published rule, and it’s why the same income can produce very different loan serviceability figures, depending on the lender.
How Lenders Shade Different Income Types
Not all income is read the same way. Steady, well-documented pay is treated most favourably, while variable or harder-to-verify income is discounted more. Here’s how the common income types tend to be assessed.
| Income type | How lenders tend to read it |
|---|---|
| Salaried PAYG income in a major currency | Most favourably assessed. Specialist lenders may count most or all of it. |
| Bonuses and commissions | Shaded more heavily, and usually needing a two-year history before a lender will use them |
| Self-employed or business income | Assessed case by case, with heavier discounts and more paperwork, such as two years of financials |
| Contract or day-rate income | Read cautiously, though a steady track record and a current contract both help your case |
| Allowances (housing, cost of living) | Counted by some lenders and ignored by many, so it’s worth knowing which is which before you apply |
| Income in a thin or volatile currency | Shaded the hardest, and not accepted at all by many lenders |
Why Currency Matters
Currency runs alongside your income type as its own factor. The more widely a currency is traded, the more comfortable lenders are counting income earned in it.
- Major, widely traded currencies such as US dollars (USD), British pounds (GBP), euros (EUR) and Singapore dollars (SGD) are the most broadly accepted, and tend to be read generously.
- Other traded currencies, including Hong Kong dollars (HKD), Japanese yen (JPY) and the UAE dirham (AED), are accepted by fewer lenders and are often shaded more heavily.
- Thin or volatile currencies are discounted the hardest, and some lenders won’t take them at all.
Where you’re based usually decides the currency you’re paid in, so it feeds straight into this. Two expats on the same salary, one paid in pounds and one paid in something exotic, can end up with very different borrowing figures for that reason alone.
Earning in one of these markets? See how approval works for Australian expats in Singapore, Hong Kong, Japan, the UK, the UAE and the Gulf states.
The Borrowing-Power Gap Between Lenders
Put the income type and the currency together and you reach the single most important fact about expat lending: the same application can produce very different answers depending on which lender assesses it.
Two lenders can look at the identical applicant and arrive at borrowing figures hundreds of thousands of dollars apart, purely from how each one shades the income and the currency. No banks or lenders publish their shading rules, so you can’t work this out from a website, which is why an expat application rewards knowing the panel rather than guessing at it.
How far apart can two lenders be?
Say you earn the equivalent of AUD $200,000 gross. One lender reads your income and currency well and counts 90% of it, so it assesses A$180,000. Another shades the same income to 60% and assesses A$120,000. That’s A$60,000 of income difference on the identical applicant, before a single number about the property is entered. A gap like that can make a material difference to what you can buy, or even whether you can buy.
Illustration only, not a rate, policy or approval quote. Real figures depend on your full circumstances and each lender’s current policy.
How to Ensure Your Foreign Income Is Assessed Favourably
You can’t change how a given lender shades income, but you can change which lender reads your application. Three things make the difference:
- Match your income type to the right lender. A lender comfortable with bonuses, contract income or self-employment will count more of it than one that isn’t.
- Match your currency to a lender that reads it well. The lender that’s generous with pounds may not be the one that’s generous with dirham.
- Sort this before you apply, not after. Applying to the wrong lender first can cost you months, and a knock-back does nothing for your file.
How Income Shading Affects Your Deposit
Income shading also feeds into your deposit. If a lender counts less of your income, your borrowing power drops, and you may need to tip more cash into the deal to afford the same property. Refer to our guide on how much deposit you’ll need. For the wider picture on borrowing from abroad, our Australian expat home loans page sits over the top of all of this.
Want to know how your income reads? Book an Expat Lending Strategy Session, without cost or obligation. In 15 to 30 minutes we’ll tell you straight what you’re likely to borrow.
How MAP Home Loans Helps
The hard part of an expat loan isn’t the application. It’s knowing, before you apply, which lender will read your income and currency most favourably and lend you the most against them. That’s what we do every day.
Our process is Match, Apply, Purchase: we match your income type, currency and situation to the lenders most likely to approve you and lend well, apply with the strongest version of your case, and see you through to the purchase. We work across a wide panel of Australian lenders, so we can find an option when the first bank counted only part of your salary or said no. You pay nothing for our service, because the lender pays us, not you.
Ready to find out where you stand? Book an Expat Lending Strategy Session and we’ll map out your borrowing power and your next step, without obligation.
The information in this guide is general information, not personal advice. Lender policies and the way foreign income is assessed change often, and your situation has its own details, so confirm where you stand with us before you apply.
Frequently Asked Questions
How do Australian lenders assess foreign income?
They convert your income to Australian dollars, then apply a discount called income shading before working out your borrowing power. How much they shade depends on your income type, your currency and the individual lender. Salaried PAYG income in a major currency is read most favourably, while bonuses, commissions and self-employed income are shaded harder.
What is income shading on an expat home loan?
Income shading is the discount a lender applies to your gross foreign income before counting it towards how much you can borrow. As general market practice, lenders count somewhere between 60% and 100% of gross foreign income, and the exact figure isn’t published, so it varies from lender to lender.
Which foreign currencies do Australian lenders accept?
Major, widely traded currencies such as US dollars, British pounds, euros and Singapore dollars are the most broadly accepted. Others, including Hong Kong dollars and the UAE dirham, are accepted by fewer lenders and often shaded more heavily. Income in a thin or volatile currency is discounted the hardest, and some lenders won’t accept it at all.
Does a bonus or commission count as income for a home loan?
It can, but it’s usually shaded more heavily than base salary and often needs a two-year history before a lender will use it. Some lenders count it and others leave it out, so it’s worth knowing which lenders will give your variable income the most weight before you apply.
Can I get an expat home loan if I’m self-employed overseas?
Yes, though expect a closer look. Self-employed and business income is assessed case by case, usually with a heavier discount and more paperwork, such as two years of financials. A specialist lender that understands your structure will generally give you a fairer read than a big bank.
How much can I borrow on foreign income?
It depends on how much of your income the lender counts. Two lenders can produce borrowing figures that differ by hundreds of thousands of dollars on the same application, purely because of how each one shades your income and currency. Matching you to the lender that reads your income most favourably is the core of what we do.
