How to get a mortgage if you’re not an Australian resident?
One of the most significant decisions anyone can make is buying a property.
It’s a big and complex decision for everyone but even more so for those wishing to buy property in a country, they do not live in. In this article we explore how to get a mortgage if you’re not an Australian resident.
Why invest in property in Australia?
Australia is one of the top 5 countries on the international property index. A new global survey has found that Australia is considered to be one of the most stable countries in the world for real estate investment. Among the 30 cities in the world ranking highest for luxury residential price growth, five Australian cities feature; Sydney, Melbourne, Brisbane, the Gold Coast, and Perth.
In 2018 approximately 9.5 million tourists visited Australia. This number increased to 10.3 million in 2019. With these exciting and growth figures, it is important to understand the process of non-resident mortgages because more and more investors and foreigners wish to purchase property in the country.
Getting approval to buy a property
If you’re ready to make the serious commitment of buying a property in Australia, understanding the property market and rules for foreign investors is key. In December 2015 the Australian Government introduced new laws for non-residents to purchase and invest in properties in Australia.
Loan applications can be made online. There is no limit to the number of properties you can purchase, but you will need specific approval for every purchase.
To invest in property or buy a home, a non-resident needs to apply to be assessed by the Australian government. All information regarding this can be found under the Foreign Investment Review Board (FIRB). According to the FIRB regulations, non-residents can buy the following properties:
A new dwelling
This means a property not previously occupied.
If you purchase vacant land you need to build a house on the property which must be completed within 4 years.
Foreigners can also buy a property to redevelop
This means knocking down an existing dwelling and building an apartment block or other form of residential property. You will be required to build two houses if you demolish one and so forth. This is to encourage greater housing development.
According to FIRB regulations, non-residents are not allowed to buy an established or existing house.
Application fees for purchasing a property in Australia
It is required by law to first obtain approval from the Foreign Investment Review board before starting any process of purchasing a property in Australia.
The application process takes 30 days from the date of submission. Any action taken before receiving approval is a breach of the law. Companies and non-residents who breach this law may face stiff fines and penalties.
Application fees are payable to the Foreign Investment Review Board. These fees will vary depending on the price of the property you intend to buy. The applicable fees are calculated as follows:
- On a property of $1 million or less, the fee will be $5600.
- If you are buying a property that cost between $1 million and less than $2 million, the costs would be $11 300.
- Fees for properties between $9 million and $10 million, costs can be up to $102 300. Complete information about the fees is available on the FIRB website.
Mortgage options available to non-residents
When your application is approved, you can start looking at mortgage options. Once you decided to purchase a property in Australia, you will most likely need to apply for a mortgage. As is the case internationally, your borrowing eligibility will be determined by your circumstances. When buying a property in Australia the borrowing capacity is between 80% and 60% of the property value.
The process of applying for a mortgage in Australia as a non-resident is not much different than for Australian citizens. You will have to provide proof of income, have the required down payment available and convince the lender that you will be able to meet the repayments.
Non-resident standard mortgage features generally include:
- A 30-year maximum term loan
- 100% offset available
- No limit to the loan size
- 15-year maximum interest
- Minimum loan size of $100 000
When applying for a mortgage you will be asked to submit the necessary documentation. This will include proof of identification, proof of income, bank statements and a valid visa.
Other costs involved in an Australian mortgage
Stamp duty. This is charged by the Government. The cost of stamp duty will depend on your location. Which state and territory the property is located in. Also taken into account would be the value of the property.
Stamp duty surcharge is calculated according to the value of the property. In New South Wales, stamp duty is 8%. Other states, Victoria, Queensland, South Australia, and Western Australia charge stamp duty of 7%.
- Lender’s mortgage insurance. If your mortgage is more than 80% of the property value, you will need to pay lender mortgage insurance. This insurance is to protect the lender in case of any defaults on loan payments.
- Property valuations. This will be necessary to determine the value of the property you are financing.
- Lender fees. These fees include application fees and settlement fees.
There are many banks and other lenders that will consider non-resident mortgages. If the whole process seems a bit daunting to you, you can also make use of a mortgage broker.
Mortgages for temporary residents
If you are in Australia on an indefinite-stay permanent resident visa (PR), one of the first things you may want to do is buy your own home. It is important to research the right area, taking into account accessibility to your workplace, shops, and schools. Looking at up-and-coming suburbs could turn your residence purchase into a savvy investment.
Because growth promotion is very important to the Australian Government, temporary residents are not penalized with higher monthly payments. For temporary residents, all the same interest rates, terms, and features will be available to you as offered to Australian citizens. The same eligibility criteria will apply to temporary residents.
Eligibility criteria for temporary residents to obtain a mortgage loan
- Regular, ongoing employment. You must be able to afford repayments and be employed.
- Proof of existing assets.
- A good credit history in Australia – if this is available.
- Sufficient funds to cover all applicable fees associated with the purchase of a property.
- Be able to offer loan security. This could be in the value of the property you intend to purchase.
- Proper proof of identification.
- Proof of indefinite-stay permanent resident visa.
- Aged 18 or over.
Temporary residents who have PR will find it easier to secure a home loan than temporary resident visa holders. If you meet the financial requirements and hold a valid PR you will be eligible to borrow a higher percentage of the property value. The average is up to 90% of the value.
First homeowners grant (FHOG) is also available to migrants with PR as long as the standard mortgage requirements are met. These requirements stipulate that you haven’t owned a property previously, that you intend to occupy the house as your main place of residence for the first 12 months and live on the property continuously for at least six months per annum.
Increase your home loan benefits
- Purchase the property jointly if your spouse is an Australian citizen.
- You may be eligible for a loan up to 95% of the property value if your spouse is an Australian citizen.
- Good employment history will count in your favour a lot. If you have held a professional position for more than two years with the same company, you could be eligible to borrow up to 10% more for your loan.
Australia is the perfect place to invest in property, with a booming economy, great lifestyle, and varying choice of locations. Whether you are a foreigner or a migrant, obtaining a mortgage as a non-resident is very much possible.