Buying a home is everyone’s dream no matter where they are located. But what does it mean for someone to buy a home in Australia if they’ve migrated here from another country? Do mortgages and home loans differ for permanent residents? In this post, we’ve put together a few FAQs (Frequently Asked Questions) we’ve come across as mortgage brokers and experienced finance lenders here at i Lend Finance Solutions.
CAN MIGRANTS GET A MORTGAGE IN AUSTRALIA?
Certainly, however, the amount you can borrow depends on your residency and visa status with the Australian Department of Immigration and Citizenship.
It may be necessary to apply to the Foreign Investment Review Board (FIRB) for permission to buy real estate; they make decisions based on each individual circumstance.
When it comes to the mortgage or home loan itself, while the assessment criteria can vary significantly among lenders, there are some general things that help your loan application:
- Serviceability – your ability to repay the proposed debt based on your current income, living expenses and the repayments of any other current debts.
- Security – the value and saleability of the property that you are giving to the bank as security for your loan. In most cases this is the property that you are buying.
- Credit history – Australian lenders cannot access your overseas credit history (with few exceptions) however, note that most lenders who approve migrant loans will use other criteria to determine their credit risk, assessing them on their financial situation, visa, assets, and overall ability to pay off the loan. Some may even lend migrants higher amounts depending on the strength of their application. Naturally, any negative or bad credit history that you have obtained in Australia would be assessed by the Australian banks.
- Employment – the stability of your employment, the industry that you work in and your history of work in that industry, both in Australia and overseas.
- Visa status – the type of visa that you are on, the conditions of your visa, and the implications this has on your ability to remain in Australia and repay your loan.
- Asset position – your assets and liabilities are assessed and compared to your level of income and age.
HOW MUCH CAN YOU BORROW?
Generally speaking:
- 80% of the property value –anyone who’s in Australia on a work visa or temporary resident visa can borrow 80% with select banks who’re happy to work with foreign citizens living in Australia.
- 90-95% of the property value – permanent residents and people on spousal visas
- Medical professionals – special loan packages are available on a case by case basis.
WHAT IMPACTS YOUR APPLICATION?
- The currency of your income is important and will affect which lenders will accept your application.
- If you are married to a foreign citizen then some lenders will not accept your application.
- Foreign business income is acceptable to a small number of Australian lenders.
- Your borrowing power may be reduced due to some lenders allowing for large exchange rate movements.
Tip: Did you know that in Australia, mortgage brokers don’t charge any fees for most loans? Instead they receive a commission or fee from lenders, and there is a wide variety of options – options that we know all about and can help source for you what suits your unique requirements and lifestyle.
ARE THERE ANY GRANTS AVAILABLE?
For migrants who have been granted permanent residency in Australia has something called a First Home Owner’s Grant (FHOG). This grants you up to $10,000 towards buying or building a new home. They do, however, vary from state to state.
ARE BORROWING OPTIONS DIFFERENT FOR PERMANENT RESIDENTS AND TEMPORARY 457 VISA HOLDERS?
Not everybody on a 457 visa is eligible. The lending policy is complicated and varies from lender to lender. Many temporary residents are advised that 80% is the max. amount they are able to borrow, meaning a 20% deposit plus costs is required. It is true that this is the general rule however there are exceptions to this policy when; The Subclass 457 visa holder is purchasing jointly with an Australian citizen, NZ citizen or permanent resident. In this scenario a loan to value ratio of 95% is available, or The Subclass 457 visa holder is a professional applicant with a salary in excess of $80,000 and with a minimum of 1 year left remaining on their visa. 457 Visa holders also cannot avail of the First Home Owner’s Grant (FHOG) and other government benefits unless buying jointly with an Australian citizen or permanent resident.
IS THERE A CERTAIN PERCENTAGE OF DEPOSIT PEOPLE SHOULD AIM TO HAVE SAVED BEFORE BUYING A PROPERTY IN AUSTRALIA?
Most non-residents looking for a home loan will need to provide a 5% deposit and have enough funds to pay for stamp duty and other expenses. This deposit must usually be in the form of genuine savings, or it may not be accepted by lenders.
A couple of notes on downpayments:
- If you have a larger deposit or already own real estate in Australia then you may not be required to prove any genuine savings.
- If your parents own a property in Australia then you may qualify for aguarantor loan which means that you don’t need a deposit at all.
WHAT FEES (SUCH AS STAMP DUTY) DO NEW MIGRANTS NEED TO BE AWARE OF ON TOP OF THE HOUSE PURCHASE PRICE?
Make sure to factor in additional costs when making an offer:
- When buying property in Australia it’s necessary to pay Stamp Duty on the purchase price. Expats who are first time buyers – most often the case – may be exempt, but different rules apply in each state so they should consult their state government website.
- Other fees that will be incurred over the course of the purchasing process are:
- the lender application fee and lenders mortgage insurance
- a mortgage registration fee which goes to the government
- a land transfer fee
- the legal fees that the solicitor will charge
- the cost of the conveyancing
- checks on the structure and pest situation.
- Once the sale has gone through the buyer also needs to pay for home insurance.
If you’ve migrated here to Australia and are ready to take the next step and purchase a new home or property, let us at i Lend Finance Solutions help you get approved. As everyone’s circumstances are different, we can help you to pull all the pieces together to give you an overall picture of your application. Contact us on 0455 500 554 or info@ilendfs.com.au