Home Loan Rate – Australia

It is fairly popular for Singaporean citizens to purchase property in Australia, either as an investment, or to live in as a temporary resident. Find out how buying property can differ between the countries, and how you can apply.

Does buying real estate differ in Australia?

When buying property in Australia, citizens of Singapore are treated the same way as other foreign citizens around the world. Despite the size of the country, real estate is not as available and affordable as one may assume.

What many people outside Australia do not realise, is that whilst land may be at a premium, land that is available for development, and properties to purchase, are not always easy to buy and afforible.

Do not worry! Mortgages brokers such as us here at the Home Loan Experts can help you find what you are after! We specialise in helping foreign citizens and temporary residents get Australian mortgages approved at competitive rates with low repayments.

For more information contact us on 1300 889 743 (when outside Australia call +61 2 9194 1700), or enquire online and one of our brokers will contact you.

What is a mortgage broker?

In nations such as Australia, the US, and the UK, the mortgage broking industry has existed for a very long time. However, much of the property in Singapore has been public housing so the industry there is fairly new. Therefore, many people in Singapore are not overly familiar with how they operate.

The services of a mortgage broker are free in Australia for most standard loan applications! This is because when a loan is approved, they are paid for their services by the banks themselves.

A broker operates as a mediator between you and a bank. Initially, you will take your details such as your employment, income, and savings to them. They will then assess your financial status and compare this to what the banks and lenders have on offer. Some brokers in Australia work with over 40 different financial institutions!

The mortgage broker should understand the lending policies of the different lenders, and apply to one they believe most likely to approve your application. This comparison also enables them to pick and choose, and often find better mortgages with lower fees and competitive rates.

Some people in Australia do apply to a bank or lender themselves. If this is the path you take it is important to remember that a bank will only offer you its own products. When you apply directly the bank has no competition, and is less likely to offer discounts on fees and interest rates.

Please also note! Every time you have a loan application declined in Australia, this goes on your permanent record. Known as your credit file, any negative financial transaction recorded here will lower the chance of approval next time you apply. This is one of the reasons why a broker can be a better option.

Do we need to apply for Australian Government approval?

Citizens and permanent residents of Singapore need to apply to the Foreign Investment Review Board (FIRB). This government body determines the level of foreign investment within Australia, including all types of real estate and property.

How much can we borrow?

In most cases, foreigners in Australia can borrow up to 70% or 80% of the value of the property they are purchasing. This is known as the loan to value ratio (LVR). In Singapore, this is known similarly, as the LTV ratio.

If you have a spouse or partner in Australia, you may be able to borrow up to 95% LVR. This is under the condition that legally, you live in the property together as joint tenants, not tenants in common. However, usually the amount is restricted to 90% LVR, or less.

When borrowing over 80% of the property value, note that you will most likely be required to pay insurance to cover the bank if you default on repayments. It is a one off payment at the commencement of your mortgage, and is known as lenders mortgage insurance (LMI).

Apply for an Australian mortgage today!

Do you have property or real estate in mind? We work with over 40 different banks and lenders, and can give you a greater chance of walking away with a great mortgage at competitive rates, on the property you desire.

Contact our specialist brokers on 1300 889 743 (when outside Australia call +61 2 9194 1700), or enquire online and they will contact you.

What is an SMSF?

A Self Managed Super Fund is a trust you use in order to manage your own superannuation. Basically instead of the employer provided super fund, you have direct control over your assets. This enables you to choose where you invest your money for your retirement.

You can put the money in a number of different places including capital investments such as shares and property. Each different investment comes with a variety of risks.

What laws and restrictions will affect investing in property?

Whilst is is possible to use your fund to invest in property, there are certain laws and restrictions that can affect your eligibility and limit the options you have available.

Some examples of the legal conditions under which an SMSF can borrow money include;

• The asset is an asset that the SMSF (you) could legally otherwise acquire if it had available funds
• A security trust (security custodian) holds the asset until all repayments are made.
• Once all repayments have been made the SMSF must have the right to acquire legal title of the asset from the Security Trustee

How much you can borrow with these loans differs from normal mortgage applications. Standard investment loans are offered at up to 80% of the property value however lenders usually restrict the amount to 72% or 75%.

It is also important to note that loc doc loans are not available and the fund must be able to prove it can repay the loan.

Which banks and lenders can help and what interest rates are available?

Many banks are not willing to lend to SMSFs. They believe that the loans are more complex and lead to less profit. However there are a number of lenders that do not see it this way and are willing to assess an application. These can be difficult to find however without professional help from a mortgage broker.

Interest rates for SMSF loans are higher than for normal property purchases. Depending upon your circumstances and the risks the lenders perceive, low interest rates may be available. However as there are large differences in pricing between the major lenders this depends largely upon which bank you apply to.

What are the risks associated with investing in property this way?

Property is what is called a capital growth investment and can be useful for capital gains and tax benefits using negative gearing and depreciation allowances. However as the global financial crisis showed, value can fall from time to time possibly leading to large capital losses.

As for cash flow, the property may be vacant or tenants may not pay rent and you may default on your repayments. If the situation arises where you need money it is also difficult to sell quickly at a high price.

How Should I Apply?

Applying for a loan on your own can be difficult. There are not too many lenders willing to lend to SMSFs and each declined application will affect your eligibility next time around as it will go on your file. Even if you find a lender yourself, such as your current bank, you are unlikely to be offered the lowest interest rate.

Applying through a mortgage broker that works with many different lenders and specialises in different loan types such as SMSF loans, is the safest option. As they know the lending criteria of the banks they are aware of who offers these loans, where you may be eligible to apply and who may have the lowest interest rates.

Mortgage brokers play an important part in the success or failure of the economy. They facilitate the sale of mortgage loans, and make it easier for borrowers to find the best deal on a home loan. You can think of your broker as the middle man between you and your lender. Since it is less than easy to find the right lender for the right price, it is in your best interests to take advantage of the broker’s intimate knowledge on the subject.

The broker typically has access to contacts in the lending industry, either within a specific territory or throughout Australia. This makes it easier for them to find a good deal on a mortgage. They save you a great deal of time, and often money, in the process.

Brokers don’t work for the lending industry directly, but their clients make up a large percentage of the people who apply. Over a third of home loans in Australia involve a broker. When you take into account the fact that the industry has only existed in the country since the 1980s, this is quite an achievement.

Despite their name, a mortgage broker can also be helpful in finding a personal loan or business loan, or refinancing current loans. Many of them are now available online, allowing them to work with more clients at the same time.

Benefits of Mortgage Brokers

– You can find cheaper interest rates. The fact that the broker can negotiate on your behalf, that they have contacts throughout the industry, and that they know what type of loan suits your financial situation means that they can offer you a better deal than if you were to deal with lenders directly.

– Do we need to say it again? Brokers have contacts that you don’t. End of story.

– Brokers have exploded in popularity over the last several decades for a good reason. You get more flexibility out of a broker than you get out of any particular lender. When you are dealing with a broker, it is not unlike dealing with all possible lenders at once.

– Unlike the bank, the broker doesn’t care if you have a terrible credit record. A broker is on your side. Since your financial history is of no risk o them, they will work with you regardless of your past. They will do what they can to get you in touch with a reputable lender willing to work with you, something that is incredibly difficult to do on your own.

– Efficiency is key here. You save time, money, and effort. Best of all, from you perspective, the mortgage broker is usually free. There may be fees from time to time, but in most cases the broker is paid by the lender, meaning that your only expenses will be for the loan itself.

In Review

A mortgage broker is your representative in the world of mortgage lending. They know people in the industry, they can act on your behalf, and they can save you time and money that simply isn’t worth wasting.