Most of the expat files that reach me have already been knocked back somewhere. Usually the borrower has called the lender they have banked with since university and been told no on a policy technicality nobody bothered to explain. That is exactly what happened here, and the reason for the decline had almost nothing to do with whether these two could afford the loan.
Client Situation
A married Australian couple, both citizens, living and working in Japan. He is a professional athlete, two years into playing overseas and currently on a confirmed two-year contract with a Japanese employer. That employer covers his accommodation, a vehicle, his tax, medical cover and insurance. She is an environmental consultant who left a salaried role and began consulting under her own ABN in September 2024. No dependents.
They wanted to buy an investment property in Queensland, up to $900,000, while still living in Japan. They had $210,000 in cash available and no liabilities at all — no car loan, no credit cards, nothing.
The Challenge
His income is paid in yen, net of Japanese tax, by an employer who handles the tax on his behalf. The payslips confirm the net figure. That sounds like a detail. It is the entire deal.
Most lenders’ foreign income policy assumes you will hand over a gross figure. The lender then applies its own shading, then applies its own tax gross-up calculation to work out what the equivalent Australian income would be. Feed a net payslip into a model built for gross figures and the output is wrong sometimes badly wrong. One major lender declined the file on precisely that basis. Not on affordability. On the mechanics of its own gross-up policy.
Her consulting income had to come out. Trading since September 2024 is well short of the two years most lenders want to see, and arguing it would have added weeks and achieved nothing. So a purchase of up to $900,000 had to service on one net foreign income.
Their actual living expenses were $1,811 a month, genuinely low because the employer picks up rent, the car, insurance and medical. Lenders apply their own expense floors regardless of what you actually spend, so a low figure helps less than borrowers expect but the employer-provided package still needed documenting, because otherwise the expense profile in the file looks implausible and an assessor starts wondering what is missing.
Then the question every credit assessor asks about a two-year contract: what happens in year three.
What We Did
Pre-approval before they made a single offer. When you are buying from overseas that is not a nice-to-have. A subject-to-finance clause and a hopeful attitude is how expats lose deposits on Australian contracts.
The lender search was for one that assesses net foreign income as net, rather than forcing it through a gross-up model it does not fit. On that basis his 14,640,000 yen converted to $156,000 AUD equivalent, and the servicing worked on that one income alone.
I documented the employer-provided package properly — accommodation, vehicle, tax, medical and insurance — with payslips confirming the net payment, so the low expense figure had an explanation attached to it rather than an assessor’s question mark.
Her ABN income stayed out of the application entirely. Cleaner file, faster assessment, and nothing gained by including it.
The exit strategy went in properly too: contract confirmed for two years, cash reserves held, and a stated intention to return to Australia. Structure at pre-approval was $792,000 at 88% LVR with LMI capitalised, against total funds required of $951,000.
They then bought in Newtown, on the edge of the Toowoomba CBD, for $620,000 well inside the $900,000 they were approved for. Buying under the ceiling let us restructure to a $496,000 loan at 80% LVR at settlement, which removed the lender’s mortgage insurance entirely.
The Numbers
Pre-approval
| Item | Position |
| Pre-approval ceiling | $900,000 purchase |
| Income used in servicing | $156,000 AUD equivalent, net |
| Converted from | 14,640,000 yen per annum |
| Second income | Excluded — under two years trading history |
| Living expenses | $1,811 per month |
| Cash available | $210,000 |
| Liabilities | Nil |
| Structure at pre-approval | $792,000 at 88% LVR, LMI capitalised |
Settled purchase
| Item | Position |
| Property location | Newtown, Toowoomba QLD |
| Purchase price | $620,000 |
| Loan amount | $496,000 |
| LVR | 80% |
| LMI | Nil — restructured to 80% at settlement |
| Deposit and costs from savings | Approximately $158,000 |
| Purpose | Investment |
Worth noting the gap between the approval and the buy. Approved to $900,000, they bought at $620,000. Buying well under your ceiling is not a wasted approval here it took the deal from 88% LVR with LMI down to a clean 80% with none, funded comfortably from the $210,000 they already held. A bigger purchase would have meant a bigger loan, LMI on top, and a thinner cash buffer left over in a foreign country. They chose the stronger position.
Practical Takeaway
Net versus gross is the whole game for expats on packaged contracts. If your employer pays your foreign tax and your payslip shows a net figure, your income does not fit a standard gross-up model and the lender that cannot process it will decline you rather than call you to work it out. Some lenders assess net foreign income as net. Most do not. Which one you apply to matters more than the rate you are chasing.
A decline from one lender is a policy outcome, not a verdict on you. Same borrowers, same income, same deposit, different lender, approved. If you have been knocked back and nobody explained which policy caught you, you have not had an answer you have had a rejection.
Getting the loan to 80% removed the LMI completely. On a loan approaching $800,000 that is a serious number, and it is worth doing the sums on whether you would rather hold a slightly smaller property with no LMI than a slightly larger one carrying it for thirty years.
And get the pre-approval before you start looking. Not while you are negotiating. Before.
How We Approach These Deals
With any expat file I ask three questions before touching a calculator. What currency is the income paid in. Is the figure on the payslip gross or net. And who actually pays the tax. The answers determine which lenders are even possible, and everything else follows from there.
After that it is the exit strategy and the LVR. Contract-based income makes lenders nervous about what happens at the end of the term, so that answer goes into the submission before it is asked for. And non-resident LVR caps vary enough between lenders that the deposit you have often decides the lender rather than the other way round.
Talk It Through
If you are an Australian living overseas and your income is paid net of foreign tax, the lender you choose matters far more than the rate. Worth sorting out before you start looking at properties.
Jeremy Harper, Credit Representative CRN 463430 of Mortgage Specialists Pty Ltd ACL 387025
This article is general information only and does not take account of your objectives, financial situation or needs. Figures are illustrative of the transaction described and are not an offer of credit. Names, lenders and property addresses have been withheld.