Can You Get a Mortgage for Bali Property from Australia?
With the rise in popularity of Australians wanting to live, invest or retire in Bali, the question of financing the purchase or lease of a property gets increasingly asked.
The Short Answer - Can You Get a Mortgage for Bali Property from Australia?
Getting a traditional bank mortgage from an Australian lender to buy a property directly in Bali is generally not possible, because Australian banks do not accept real estate in Indonesia as security for a standard mortgage. However, if you own property in Australia with sufficient available equity, you can apply for an Australian equity release or cash-out refinance loan to fund your overseas purchase in cash.
Why Foreign Ownership Rules Limit Your Financing Options
Australian lenders require property collateral to be located within Australia. Major Australian lenders view Indonesian real estate as an unsecured foreign risk, meaning they will not take a mortgage over foreign real estate, like a leasehold villa in Indonesia, because if you default, they cannot repossess or sell it under Australian law.
Will an Australian Bank Lend Against a Bali Property?
No, an Australian bank will not lend against a Bali property because domestic lenders cannot take security over real estate located outside of Australia. Should you default on the loan, Indonesian law does not allow the foreign lender to repossess or sell it to service the debt. Regardless, guidelines from the Australian Prudential Regulation Authority (APRA) stop local financial institutions from accepting overseas real estate as standard mortgage collateral.
How Australians Actually Fund Bali Purchases
Buying a property in Bali can be funded in a few different ways. Each has its pros and cons and presents varying levels of risk for the buyer.
With properties in Bali costing significantly less than your average home in Australia, many buyers use the equity of an existing property in Australia to fund their purchase in cash. This is the most frequent way Australians fund a Bali purchase. The catch here is that you will be left servicing an increased debt in Australia and therefore will be subject to domestic home loan interest costs which may reduce the profitability of your Bali purchase.
Alternatively, there are some local Indonesian banks that offer mortgages to foreigners, but they require Indonesian temporary or permanent stay permits (like a KITAS or KITAP), high down payments of 30% to 50%, and specific corporate structures like a PT PMA. This makes securing a loan from them very difficult and requires good organisation prior to making the purchase to ensure all the paperwork is in place.
Developer financing is a third option for off-plan or new developments. Many developers allow buyers to pay via structured, staged finance plans with an upfront deposit and then further payments tied to construction milestones. As the upfront costs are low and the ongoing payments are done in stages, this means there’s some savings on interest when drawing against equity in your Australian property.
What Indonesian Bank Financing Looks Like If You Qualify
For foreign buyers seeking a loan from an Indonesian lending institution there are strict requirements. Firstly, you typically need a temporary stay permit (KITAS) or permanent stay permit (KITAP). Next you will need a large deposit, with lenders usually demanding a high down payment of 30% to 50% of the property value.Finally, you will have to show a steady, traceable monthly salary with a high minimum income, often around IDR 25 million per month or more. You may also need a local employment or local business ownership history of two years or more.
What to Sort Out Before You Commit
Before committing to a property loan in Bali, the first step is ensuring you have a qualifying ownership structure and are eligible. Indonesian banks won’t issue a mortgage against a Leasehold (Hak Sewa) title because it cannot be used as bank collateral (Security). Financing is only available for properties with freehold-equivalent corporate titles like Hak Guna Bangunan (HGB) or Hak Pakai (Right to Use). The safest way to get a mortgage is by setting up a PT PMA (a foreign-owned Indonesian company). The bank then lends to the company, which holds the property under an HGB title.
Indonesian banks are also very strict on the paperwork, so hire a local notary to ensure all due diligence is done regarding suitable permits and certifications for the building, as well as other compliance requirements. It can be a complicated and time-consuming procedure, so it’s important to start as soon as possible during the negotiation and purchase process.
Also, a common mistake foreign buyers make is calculating their loan amount based solely on the sticker price of the property. There will also be an additional 7% to 12% in transaction costs, which must be paid out-of-pocket, not with the loan. These ‘extras’ include luxury/acquisition taxes, notary and legal fees and setting up your PT PMA.