Updated June 2020
It seems barely a day goes by without the subject of mortgages and home ownership in Australia being raised.
Every month, we wait with bated breath as the Reserve Bank of Australia announces whether or not interest rates will be altered. Much of this depends on circumstances in the global economy and, after the upheaval caused by the Covid-19 pandemic, it’s likely rates will remain relatively low for the time-being. According to finance site Finder, the average variable home loan interest rate currently stands at 4.63 per cent; however, rates as low as 2.49 per cent can be found, depending on the particular product you;re going for.
As a leading migration agent in Perth, we’re regularly asked about the best way for migrants to secure a mortgage. Many people mistakenly think that home ownership is the sole preserve of fully-fledged Australian citizens and permanent residents, but this is certainly not the case.
This handy guide should give you a better idea of what expats need to do to realise their dream of owning their own home in Australia.
Borrowing money as a temporary visa holder
Applying for a mortgage can be more complex for a temporary resident, but it’s certainly doable. Let’s break the process down into ten simple stages, before adding a bit more meat to the bones.
1) Get approved – In the vast majority of cases, the first thing you need to do is seek approval from the Foreign Investment Review Board (FIRB). Whether you plan to live in Australia yourself or you just want to invest in property there, the FIRB will ultimately give their blessing to each applicant, which lets the Australian Government know that you’re not a risk.
This is understandable, as the last thing the authorities need is a multitude of people from all over the world defaulting on mortgages in Australia. It wouldn’t take long before the banks collapsed into an embarrassing heap if this process became the norm.
2) Do your research – Once you’ve established that you’re eligible to buy property Down Under, make sure you have a clear idea of where you want to live. While your personal circumstances – family and job – are likely to dictate this, you need to be aware that property prices vary dramatically depending on where you are looking. We’ll cover this later.
3) Have you got the cash? – Before you submit your mortgage application, you need to assess the state of your own finances. We’ll discuss loan-to-value ratios a little later, but regardless of how much you are borrowing, you will need to stump up some form of deposit and cover processing costs. If you haven’t got the funds, the chances of you finding an agreeable mortgage are slim to none.
4) Scour the loan market – Search for a mortgage provider that is renowned for working with temporary residents. Certain lenders are rigid in their stance on lending to temporary residents, and their rates sometimes reflect this. However, some banks offer special deals for temporary visa holders, so it’s certainly worth shopping around. You may find it worthwhile to speak with a mortgage broker as they know the industry inside out.
5) Make your application – Once you’re happy that you’ve found the best deal, you can begin the application process. It doesn’t matter where in the world you are applying for a mortgage, you need to be thorough when providing personal information. This can be the difference between an approval and a rejection.
6) Make an offer – By this stage, your mortgage provider will have given you a clear idea of how much money you are entitled to borrow. Once you have this confirmation, you’ll be able to make bids on properties that you fancy.
7) Get a survey – Before you finalise your loan, you should pay an expert to survey your chosen property. This will uncover any nasty surprises that might make you think twice about your purchase. Minor things such as a few creaking floorboards or a dripping tap you can live with, but if the house has major structural faults or a pest infestation, you may wish to reassess. If you’re building a new home, think about investing in the services of an independent building inspector.
8) Fulfill your legal obligations – You’ll need to work with a conveyancer. Sadly, there’s no avoiding it. Buying a house is a major commitment and as such you can expect plenty of legal I’s to dot and t’s to cross.
9) Settle up – Your solicitor should take care of when you’ll be able to receive the keys to your house, also ensuring that the funds from your mortgage provider are ready to hand over to the seller.
10) Live happily ever after – You’re in! Enjoy your new Australian abode. Maybe it’s time to become a full-time Aussie now?
Your questions answered
If you follow the basic steps outlined above, you won’t go far wrong. That said, there are plenty of other things that temporary Australia residents need to know when applying for a mortgage.
• What’s the maximum loan value ratio I can expect?
The default answer to this is 80%, but don’t listen to those who tell you that this is the best you can hope for as a temporary visa holder. Depending on your circumstances, you can get a loan for anything up to 95% of the value of your new home. Chat to a bank or to your mortgage broker.
If your deposit is less than 20 per cent, you may need to pay Lenders’ Mortgage Insurance. This essentially covers the lender if you are suddenly unable to meet the terms of your mortgage.
• Will I get a worse rate than Australian citizens?
This depends where you get your mortgage from. While some lenders are wary about sanctioning loans for temporary residents, there are plenty that tailor packages specifically for this market. You might even secure a rate that is lower than the national cash rate and better than most Aussies can find.
• Does my mortgage become null and void if I lose my job?
In short, no. While losing your sponsorship from your employer is obviously a huge blow, this doesn’t automatically mean you’ll be shipped out of the country. If you can’t meet your repayments and end up defaulting on your loan, then you will eventually be repossessed, but that’s the case for all mortgage customers the world over. If you can find a new job in a quick enough time, you’ll be fine.
• Will buying my own property help my chances of securing permanent residency?
While being able to demonstrate that you are able to borrow money responsibly won’t do you any harm, the Department of Home Affairs ultimately doesn’t take property ownership into consideration when assessing your permanent residency application.
• What kind of lump sum do I need for my deposit?
This very much depends on the value of the property you intend to buy. However, you must also ensure you have set money aside for any stamp duty contributions and other fees that you’ll incur. This is where a lot of mortgage applicants come unstuck.
• Will I get any help from the government?
Initiatives like the First Home Owners Grant are intended for Australian citizens and residents, so you won’t be able to apply for these. However, these become available to temporary residents if they are purchasing their home alongside their Australian partner.
What’s the property market looking like heading into 2021?
Now you’re fully clued up on the process of applying for a mortgage as a temporary resident of Australia, it’s worth giving you the lowdown on how the country’s property market is shaping up heading into 2021.
There’s been a lot of talk about Australia being one of the most unaffordable places to live in the world, but much of this is misguided. Assessing the housing market as one single entity can be counterproductive, as things can vary drastically depending on the region you are planning to live in. There are numerous factors that contribute to price fluctuations, including base rate changes, economic variables, developments in the banking sector and, perhaps most importantly, buyer demand.
Property prices have fallen across many states over the last five years and the Coronavirus pandemic isn’t likely to lead to a rise in prices, although stock levels may be impacted.
Increasing supply to meet demand
The Government recently announced incentives for people to build new properties. As the supply of properties increases, houses will inevitably become more affordable.
Melbourne and Sydney are renowned for being more expensive than other parts of the country, which is mainly due to their popularity and the fact that there are only so many dwellings to go around.
Is now the right time to buy?
For many people, it’s impossible to pick and choose when you get on the property ladder – you have to grab opportunities as and when they present themselves. Whether the Covid-19 pandemic will heavily impact prices remains to be seen, but the crisis may result in sellers delaying their moves and causing a shortage of stock.
To discuss your accommodation options in more detail, please don’t hesitate to get in touch with one of True Blue’s expert migration agents.