Getting a home loan is always complicated, but it’s particularly complex if you’re not a citizen of the country where the home is located. Before pursuing this type of home loan in Australia, it helps to get all the facts and understand what the process looks like ahead of you. Reading this guide will help you understand the surrounding restrictions and how you can successfully apply for a non-resident home loan.
What is an Australian non-resident home loan?
Non-resident home loans, also called expat home loans, are simply home loans designed for foreign citizens looking to purchase real estate in Australia. For this loan type, lenders are cognizant of the specific restrictions that the Australian government imposes on these buyers.
Expat home loans traditionally need higher deposits and will require proof of income in an acceptable currency. You can get expat home loans with fixed interest rates as well as those with variable interest rates, and split-interest loans are also available.
Who can apply for an expat home loan?
There are a wide variety of individuals who might take out an expat home loan. Not all of these individuals will have the same requirements.
- Australians living and working overseas (expatriates)
- Australian Permanent Residents
- New Zealand citizens living in Australia
- Temporary residents living in Australia, including those with a 457 visa, student visa, spouse visa, bridging visa, or TSS visa
- Foreign investors
What restrictions are there for an expat home loan?
There are several conditions and restrictions enforced by the Australian government concerning home loans for non-residents.
- FIRB approval: If the buyer is not a citizen or permanent resident, permission from the Foreign Investment Review Board is needed when purchasing real estate.
- Vacant land usage: If buying an empty plot of land, a new property must be constructed on that parcel within 4 years of FIRB approval.
- Established dwellings: Buying a pre-existing building (as opposed to a new build) is typically forbidden, unless the property is being redeveloped and the number of homes increases.
- Future re-sale: If a temporary resident buys a pre-existing home, they must either sell it when they leave the country, or plan to eventually become a citizen or permanent resident.
- Individual state restrictions: Some states may assess additional duties of up to 8% for foreign purchasers. There may also be restrictions on eligibility for first home buyer grants or similar programs.
Failure to adhere to FIRB policies can result in serious penalties, including fines or even a criminal sentence.
What is the role of the Foreign Investment Review Board?
The FIRB is a government entity which reviews foreign investment proposals. FIRB permission is required before you can obtain a non-resident home loan. They will first verify your general eligibility to purchase an Australian home, and then verify your eligibility for a specific property.
FIRB requests are typically approved as long as the applicant demonstrates that the purchase will bring economic growth to that community. Applications can be submitted online via the Australian Tax Office (ATO). Note that the application takes around 30-60 days and also carries some fees, which vary based on the type of applicant.
Which groups do not require an FIRB endorsement?
The following categories of individuals would not typically require FIRB approval:
- Australian citizens living in Australia
- Australian citizens living overseas
- Members of indigenous Australian tribal groups
- New Zealand citizens
- Australian permanent visa holders
- Foreigners buying property jointly with a spouse who fits in an above category
Which groups do require an FIRB endorsement?
The following categories of individuals would typically require FIRB approval:
- Foreign nationals living overseas
- Foreign nationals living in Australia on a temporary, working, spouse, or student visa
What is the application process for a non-resident home loan?
Once FIRB permission is secured, the rest of the home loan process looks pretty ordinary. However, it may still advantage you to work with a mortgage broker that specialises in non-resident home loans.
How to get a home loan as a foreigner in Australia
Below is a roadmap that helps you understand the non-resident home loan application process from start to finish.
- FIRB applicant eligibility: Confirm with the FIRB that you are generally eligible to buy property in Australia.
- Lender selection: Pick a lender that suits your needs regarding borrowing amounts, interest rates, and repayment schedules.
- Document assembly: Gather the necessary paperwork.
- Proof of identification
- Proof of income
- Proof of deposit funds
- Records of existing loans, debts, or other liabilities
- Credit history
- Details of the property you are pursuing
- Translation: If any documents are not in English, translate them through an NAATI-certified service.
- Pre-approval: Submit the documents to your chosen bank and secure a preliminary loan approval.
- Property selection: Select the property you intend to buy and agree on a prospective purchase price with the seller.
- Deposit payment: Pay the deposit to the seller to secure the property.
- FIRB property eligibility: Receive approval from the FIRB for the particular property you are buying.
- Purchase completion: Finalise the necessary payments and take ownership of the property.
What are the financial requirements for an expat home loan?
Like any loan, expat home loans will require an upfront deposit, besides many other requirements. This deposit size will vary based on which non-resident category you belong to. It also varies for each lender. However, a greater deposit is typically needed compared to an ordinary home loan. Most loan deposits are around 10% to 20%, but expat home loans can often require anywhere from 20% to 40%.
What will determine my borrowing maximum for a non-resident home loan?
There are several factors that can affect the total amount you are eligible to borrow.
- Income tax in your country
- Pre-existing foreign loans
- Current income
- Citizenship status
- Other ongoing liabilities
What are the costs associated with a non-resident home loan?
Before launching into the loan process, it helps to have a full picture of associated expenses beyond the deposit.
- FIRB application fees
- Base stamp duty costs
- Supplemental stamp duty costs for foreign investors
- Property inspection fees
- Lenders mortgage insurance
- Conveyance fees
- Land title and registration fees
- Loan application fees
Non-resident home loan FAQ
Can buying a house grant you Australian Permanent Residency?
Not necessarily. A home purchase does not automatically lead to permanent resident status. However, it can improve your application since it demonstrates your commitment to a long-term future in the country.
What is the cost of the stamp duty surcharge for temporary Australian residents?
This will depend on your state, but you can typically expect an additional 3 to 8% for non-resident buyers. Note that the NT and ACT currently have no stamp duty surcharge for foreign buyers.
Are foreign citizens able to buy commercial property in Australia?
Yes, it is possible for foreign citizens to buy Australian commercial property, but they will require authorization from the FIRB.
Does my home country’s credit score get transferred to Australia?
Typically not. For most countries, their credit rating system is separate from Australia’s and that information will not transfer over. The notable exception is New Zealand, which shares a credit rating system with Australia.
Will my investment property’s rental income be taxable if I’m a non-resident?
Yes, the income from the rental will generally be subject to taxation. It will not matter if the investor is a resident or non-resident.
Biggest things to know about non-resident home loans
There are many pathways available for non-residents looking to take out a home loan in Australia. However, some of these pathways are more tightly regulated than others. Therefore, learning about non-resident home loans equips you with the expertise to successfully navigate your home purchase.