Australia is a wonderful place to set up your roots and build a life with your family. It offers everything you could want, from stunning landscapes and pristine beaches to friendly, welcoming people.
However, setting up a home in a new place can be a daunting experience, mainly if you are an expat. As exhilarating as owning a house is, getting a mortgage can be difficult in a foreign market, with the mean price for residential spaces rising to $896,000.
The key to smoothing this process is to be well-equipped with the right information to understand the process and prepare accordingly. Let’s explore the requirements for getting a mortgage as an expat in Australia!
Getting A Mortgage In Australia: Things To Consider
If you’re considering purchasing a property in Australia as an expat or non-resident, here are some things you should keep in mind:
The Foreign Investment Review Board
As a foreigner, you can legally purchase property in Australia even if you aren’t a resident. This is if you can submit an application and obtain approval from Australia’s Foreign Investment Review Board (FIRB).
FIRB approval is required in the case of the following:
- Temporary residents on a spousal visa, 457 work visa, student visa, or Temporary Skill Shortage visa
- Foreign investors purchasing a property without an exemption certificate from the dweller
The application fee for the FIRB depends on the value of the property or land that you wish to purchase. It starts at around $4,000 and can go up beyond $237,600 if the property is worth over $10 million.
You will also be required to pay the Foreign Citizen Stamp Duty and the usual fees accompanying the purchase.
Typically, you can qualify for a FIRB if you are purchasing vacant land to build a new property on or a new property that is not an established dwelling.
Remember that you cannot apply for “pre-approval” from the FIRB and must choose a specific property to buy before applying for FIRB approval.
To safeguard yourself in case your FIRB application is not approved, you can include a clause or condition in your sale contract that allows you to back out of purchasing the property in such a situation.
Higher Rates And Hidden Costs
As someone without resident status, you may incur many additional expenses when purchasing a property in Australia.
Depending on the bank’s policies and the property you are looking to purchase, you may have to pay either fixed or variable interest rates or a hybrid combination.
Sometimes, the interest rates and deposits may be higher than usual if you are an expat.
You might also have to pay legal fees, property inspection fees, and more. Some costs may need to be paid upfront, like the FIRB fees and deposit on the property.
Land transfer, conveyance, and pest control fees are also costs to consider when looking at properties and budgeting for the same.
Borrowing Limits and Currencies
Any home loan or mortgage may come with a maximum borrowing capacity. While non-resident Australian citizens who are expats or permanent residents in other countries may enjoy a 70-90% borrowing capacity, you may only get up to 80% of the property’s valuation as a temporary resident.
However, this is not a major downside, as a Lender’s Mortgage Insurance (LMI) is payable if you receive a mortgage where the property’s Loan To Valuation ratio (LVR) exceeds 80%. Making a 20% deposit on a property can benefit you in the long run, as you won’t have to pay for the lender’s mortgage insurance.
Currency You Receive Your Salary In
Your mortgage depends on several factors, including your savings, visa status, credit history, earnings, and more. The currency in which you receive your salary can play a major role in how easily your loan is approved and the amount for which it is approved.
You may find it more challenging to receive a loan if you receive your salary in a currency other than AUD or one of the following major global currencies that are accepted as foreign income:
- United States Dollar
- Canadian Dollar
- Great Britain Pound Sterling
- Swiss Franc
- Honk Kong Dollar
- Singapore Dollar
- New Zealand Dollar
- Chinese Renminbi
- Japanese Yen
Banks might calculate a 20% reduction in the foreign currency rate at which you are earning your current salary. This is to take into account any currency fluctuations that may occur in the future and safeguard themselves against the same.
What Documents Do You Need To Provide To Obtain Your Mortgage?
If you are applying for an Australian mortgage, it’s important to have all the documents you will require on hand to simplify the process and reduce the risk of any last-minute problems or rejections.
The main documentation and evidence you will require are as follows:
- Personal identification documents (for example, your passport, driver’s license, etc.)
- Proof that you qualify to buy a property in accordance with the FIRB rules
- Proof of your residence in Australia
- Documents that provide your credit score is good, such as proof of your wages, bank statements, credit checks, tax returns, etc
- Documents to prove that you can service the mortgage, such as utility bills in bank statements that show that you can afford monthly payments
- Other relevant documents and copies that may be required by the specific bank or lender
Please keep copies of these documents handy in case you must submit them along with your application. You can attest to them if needed, too.
Obtaining a mortgage in Australia as an expat may seem like a difficult and daunting process, but the results are well worth the effort. Understanding the key criteria and seeking professional guidance can greatly enhance your chances of securing a loan.
While each lender may have different criteria, if you have a valid visa, stable income, sufficient deposit funds, and FIRB approval, it will be much easier for you to secure a mortgage.
Remember to familiarize yourself with the various mortgage options available and carefully compare interest rates and terms to ensure you make an informed decision. Also, don’t forget to read the fine print!