The Australian banking system works in much the same way as the banking system in other industrialized nations throughout the world. It is easy to get in touch with representatives of the bank, and in most cases the banks are used to working with immigrants who do not speak English.

Concerns You May Be Facing

If you are the type of person who spends a great deal of their time moving from one location to another across the globe, or if you are moving to the country, you have many different things that you need to keep track of. Not only do you need to physically relocate your possessions and find a place to live, you also need to deal with bureaucratic issues such as making sure that your visa is in working order.

In addition to all of these concerns, it is also important to make sure that your financial situation is properly taken care of. This covers everything from opening an Australian bank account to ensuring that all of your payments are made on time. Thankfully, the Australian banking industry can help simplify this process and alleviate some of the stress that you might be going through.

The Australian Banking Industry

The banking industry in Australia is one of the most reliable in the world. In fact, the World Economic Forum has rated the Australian banking system second place compared to any other banking system in the world. In addition to bank accounts, banks in Australia offer a wide range of wealth management services. Products that they offer include loans for personal, business, and mortgage purposes. Insurance, investments, credit cards, and financial planning services are also available.

Many of the banks in the country can help you set up your accounts, credit cards, and other financial products even before you move into the country, which makes the process a great deal simpler.

In addition to this, there are international banking teams that you can take advantage of, providing you with access to a staff that can speak a wide variety of languages.

Checking Account

The first place that you will want to start when you move to the country is a simple everyday checking account that you can use for day-to-day transactions like paychecks and grocery shopping. There are several things that you will need to think about before you choose to set up an account.

The first thing that you should look for is a bank that is part of a strong network. The availability of the bank should be widespread so that you will be able to access your account no matter where in Australia you are located. At the very least, you will want access to ATMs that will give you access to your account without needing to pay a fee. Australia is not a small country, so the importance of a national chain should not be understated.

It is also a good idea to deal with a bank that you have access to twenty four hours a day, at least online. Do your research and find out if their telephone and website systems are convenient, easy to use, and offer a wide variety of services. The more you can do with an online system, the more time you can save. This advantage is twofold, because a bank with good automated systems also has more time available for its customers who need to speak with a human being.

Never sign up for a bank account without understanding its fee structure. You might be charged for certain types of transactions, for not having enough money in the account, for over-drafting, or even simply for having an account with the bank. Take a close look at the way you use your bank account before you agree to any fee structure.

Savings Accounts

If you have additional funds that you want to protect from the effects of inflation, it is also a good idea to sign up for a savings account, a certificate of deposit, or a similar financial package. Banks earn money by lending out their customer’s funds in exchange for earned interest. If you open up a savings account, you can earn some of this interest yourself. Be sure to find out what the withdrawal limits and fees are before signing up.

Credit Cards

It is a good idea to have a credit card on hand in order to make emergency payments that you can’t otherwise afford, or to build up your credit rating. Banks in Australia offer the same major credit cards that are available in most countries throughout the world, including MasterCard, Visa, and American Express. They also provide new “contactless” cards, which make it possible for you to buy inexpensive items without needing to enter a PIN number or leave a signature.

Of course, if you are planning to make a larger purchase, it is usually a better idea to take out a loan instead. The interest rates are lower, meaning that the costs are also lower in the long run. If you have enough evidence that you will be able to pay off your loan, there are some banks that will approve you on the same day that you apply.

If you are a new migrant to Australia then you should seek the help of a professional mortgage broker before you take on the commitment of a loan. Borrowing money in a new country is an entirely new ball game, so you need to get advice to avoid making any mistakes.

If your financial history does not allow you to receive approval for a home loan on your own, you might have more luck if you take advantage of the power of family pledge mortgages. This is when a family member agrees to offer support for your loan by putting up equity in their own property or providing income assistance. This can also be beneficial for people who want to apply for a loan on a home that is too expensive for them to apply for under normal circumstances.

Reasons Why You Might Want to Apply

• If you have children who are buying a home, they may be limited in the size of a loan that they can apply for. This could be because of their income, or it might be because of the size of their deposit. Relatively small deposits also mean higher interest rates and lender’s insurance.
• You may want to help your children buy a property now, rather than forcing them to wait until they can save up a large enough deposit.
• You may have children who don’t have enough money to buy an expensive home now, but they are in a field where it makes sense to think that their income will continue to grow.

Equity Support

Equity support is the most popular form of family pledge mortgage. Under this model, you take advantage of the equity that you have placed into your own home as a form of security. This makes it possible for the family member to buy property of their own.

When somebody takes out a loan with a deposit smaller than 20% of the value of the home, the borrower is usually required to pay for lender’s insurance. The cost of lender’s insurance can be very high, and dramatically reduces the amount of funds available each month for other purposes.

If a borrower has a small deposit, or no deposit at all, a family member can dramatically improve the situation by making a family pledge. In this case, the borrower only applies for an 80% mortgage for the new home. The family member then secures the rest of the value of the home using the equity in their own property.

This process has several benefits. First of all, it is much simpler for the bank to approve the application. This is because the bank only needs to approve the loan internally. It does not need to contact their lender insurer to see if they also approve the loan. The monthly costs are also much lower, since the borrower is not required to pay for this insurance.

In most cases, the person making the pledge will only be responsible for the 20%. They typically are not held liable for the rest of the loan, so the risks are relatively low for them.

It is also worth pointing out that there is no reason that the equity has to come from a family home, although this is the most common type of pledge. It could also be an investment property. All that matters is that the property is owned by the person making the pledge.

A family pledge can be removed when the remaining principle of the loan is less than 80%. This can be because the value of the property increased, because this part of the balance was paid off, or both.

Income Support

This type of pledge is less common because it requires the person who is making the pledge to make themselves liable for the entire amount of the loan. If the borrower’s income is not high enough for the lender to offer them a loan, you can pledge that you will provide your own income to help pay for the loan if necessary. The downside of this is that if they fail to make payments on the loan, you are held 100% liable to make the payments.

While this is significantly different from equity support, both types of pledge can be made at the same time. Equity support can be used to cover the deposit, while income support can be used to increase the overall size of the loan.

An income support pledge can be removed once the other borrower can demonstrate that they are earning enough income to pay for the loan on their own.

Learn more about family pledge mortgages.

Buying a home is never easy, and it gets harder when you are not a citizen. If you’re moving to Australia you might need some advise about the best way to move forward. Here are ten things to keep in mind.

1. Save as much money as you can. You will need to make a deposit in order to purchase a home. In most cases, your deposit will be between 10% and 20% of the value of the home (or more if you like). Lenders are much happier to work with borrowers who can save up a deposit. If you plan to buy property from Australia, you should start transferring funds into an Australian bank account, even if you don’t already live in Australia. Australian banks will see you as a lower risk when they see that you have been saving money for a period of three months or longer.

2. What will you be able to borrow? Obviously, this will depend on your financial situation and your income. That said, your residency status can also have an effect on the type of loan that you can apply for. If you are a foreign citizen or temporary resident, you will usually need to make a deposit of 20% of the value of the home. In some cases, a lender might be willing to accept a 10% deposit if you have been working in Australia for over a year. As a permanent resident, or somebody who is married to or in a relationship with a permanent resident or citizen, you will usually be eligible for a 95% mortgage.

3. Save up for expenses. No matter what size deposit you are required to make, there are other expenses that such as taxes and fees that are not included in the purchase price of the home. These amount to about 5% of the value of the home. You should expect to need to pay these costs in addition to the deposit.

4. Government approval. Since you are not a citizen or permanent resident of Australia, real estate purchases are policed by the Foreign Investment Review Board. This is not as frightening as it might sound. FIRB exists to ensure that foreign investors don’t take part in frivolous speculation that does nothing to help the Australian economy. If you are buying a home for your own personal use, you have nothing to worry about. Even so, you will need to apply for FIRB approval before buying a home. If you are an investor, you are limited to buying new property.

5. First Home Owners Grant (FHOG). Only permanent residents and citizens are eligible to receive this grant, so you should either wait until you become one or do without one.

6. Talk to a mortgage broker. Generally speaking, brokers are free in Australia. They receive commission from the lender, although they work independently of them. A broker can help you find the lender that best fits your situation. Not all banks are willing to lend to foreigners and temporary residents. They also know which lenders charge reasonable rates. In many cases, brokers have exclusive deals with lenders that are not otherwise available. A broker also eliminates the need to shop around for the right lender, and you will only need to provide your financial information once.

7. Get pre-approved. It is a bad idea to offer to buy a property without approval from the bank. If you agree to buy a home, and the bank doesn’t approve you for a loan, you can lose your deposit, and might even be sued by the vendor. Pre-approval also reduces the wait time necessary before buying a home. The right home for the right price doesn’t stay on the market for very long. If you aren’t pre-approved, it might take longer than the vendor is willing to wait for you to receive the loan.

8. Income isn’t the only consideration. Lenders will also need to collect information about your expenses. This might include the costs of marital or child support, the costs of insurance membership, memberships with other groups, cable subscriptions, private school costs, and anything else that you are required to pay for each month. If you are having trouble getting a loan for the type of home you are interested in, you might be able to help your situation by reducing some of these expenses, if possible.

9. Find a conveyancer or a solicitor. They handle the legal documents in order to make sure that there is no potential for legal problems, and to assure that the contract between you and the vendor is fair.

10. Do not apply for a large number of mortgages, loans, or credit cards in a short period of time. This can hurt your credit rating, and make it difficult to get approval.

Learn more about buying a home in Australia.

When you decide to purchase a piece of property, either as a residence or for financial investment purposes, you will most likely need to apply for a loan. Before you will be granted a loan, the bank will want to be certain that you have the ability to make the repayments. This typically requires you to produce tax documents and check stubs, but not everyone can do this.

Applying for mortgages can be an intimidating process, especially if you don’t have the documentation usually required by lenders. There are a lot of different types of loans available, but many of them aren’t accessible to individuals with little or no proof of income, such as those that are self-employed or work as independent contractors. However, there is an option available: the low doc home loan.

A low doc loan, also referred to as a low documentation loan, is a home loan in which the paperwork used in standard loans is not required. This type of loan is perfect for self-employed borrowers that don’t have the proof of income papers typically used in applications for standard loans. Generally, lenders of low doc loans will ask the applicant to provide some proof of income, such as recent bank statements. In addition, low doc home loans are only available for loan to ratio values up to 80%.

Lenders offering 80% low doc home loans may have varying requirements, however most lenders ask that the borrower meet the following basic criteria:

1. You have been self-employed for at least one year in the country of Australia.
2. You have had an ABN number for at least one year.

The idea behind these criteria is to make sure that the borrower has a steady source of income and can afford to make the repayments. Other requirements may also apply depending on the lender. However, understanding these other requirements can be tricky. The requirements for low doc loans with high loan to value ratios, usually between 60% and 80%, are fairly confusing. Below, you will find the details of some typical low doc loan situations.

Issue A:
Refinancing a loan without sufficient business activity statements, or BAS statements.

One option for solving this problem is to acquire a loan with a loan to value ratio between 60% and 70%. Loans for a loan to value ratio of up to 70% can be acquired from one of the major providers without trading statements or BAS statements. Instead, the applicant needs only provide a letter from an accountant confirming that the loan is affordable. In addition, there is no mortgage insurance is required. Some other providers may also provide low doc loans up to 70% loan to value ratio, but the qualifications are stricter.

Another option would be to acquire a loan for a loan to value ratio between 70% and 75%. This type of loan can be obtained through a regional bank with certain requirements. The applicant must have been GST registered for more than 2 years for a loan to value ratio of 75%, but only for one year if the loan to value ratio is 70% or less. This loan is only available if you will remain under $1,500,000 in total loans, including those you may have from other lenders. Not available to developers, primary producers, or builders.

The third solution is to look for a loan with a loan to value ratio between 75% and 80%. Though it is possible to find a loan of this type from providers who won’t ask for BAS statements, the rates and fees will likely be higher than for other loans. In addition, it is not easy to find lenders that will consider cash out loans.

Issue B:
Purchasing a home at 80% loan to value ratio without BAS statements.

In this case, you can get a loan from a non-bank lender, a second tier bank, regional bank, or even a major bank. You will need GST registration and ABN for one year or more. Fees and rate will be comparable among lending institutions.

Issue C:
Obtaining a loan when your exposure is too high with your current lender.

To solve this problem, you will need to engage in debt consolidation and then spread your loans out over several lending institutions so that you meet all of the requirements of each institution. In doing this, it will give you the ability to take out another loan.

Whether you are applying for home loans or personal loans, there are options available for getting the money you need. If you don’t fall under any of the aforementioned circumstances or if you have bad credit, you could also consider using a guarantor to increase your borrowing ability. A guarantor is someone that agrees to be responsible for your loan should you default on it. The guarantor’s assets will be taken into consideration when you apply, which can dramatically increase the amount of money for which you are eligible.

Learn more about low doc loans.

When you know you have enough income to pay mortgage payments each month, but you simply don’t have enough money saved up to make a good deposit, this can be an extremely frustrating situation to deal with. You might be able to get approved for a mortgage with little or no down payment, but you’ll be forcing yourself to pay for unnecessary costs like lender’s insurance, and possibly a higher interest rate.
Thankfully, avoiding lenders insurance is possible even if you don’t have a deposit saved up. If you have family with equity in a home of their own, or real estate that they are financially responsible for, you might not need to make a deposit at all. This is possible through something called a family guarantee.

Why Banks Require Lender’s Insurance

Before we discuss how a family guarantee can help you avoid lenders insurance, allow us to discuss why it exists in the first place. When a bank decides how to approach a borrower, they perform a complex calculation based on rules that determine how much of a risk you are to them.

As such, a bank has to plan ahead to deal with these risks. If you were to take out a home loan, only to find yourself in a situation where you could no longer pay it off, the bank finds itself in a precarious situation. They home now belongs to them, but it is of no value to them unless they sell it.

Banks are not home salesman, and they are not able to sell the home at its maximum value. In many cases, the bank is forced to sell the home for a loss. This is why they ask for a deposit in the first place. The deposit protects the bank from these losses.

But the bank does not feel protected from those losses if the deposit is too small. They have to find that protection elsewhere, so they hire an insurer. These lender’s insurance companies will cover the losses to the bank if you are no longer able to make your mortgage payments.

Of course, the bank has no reason to pay for the cost of lenders insurance themselves. If that were the only option, they would only lend out to people who could offer a large enough deposit. The banks don’t see it that way, however. They can simply ask the borrower to pay for the lenders insurance, and most borrowers who haven’t saved up a deposit are happy to do so, because they would rather not wait any longer.

How a Family Guarantee Resolves the Issue

With a family guarantee, the risks faced by the bank can be alleviated without making a large deposit and without paying for lender’s insurance. Through this process, the family member agrees to act as a guarantor. They are usually a parent, but they could also be a sibling or a grandparent. They then choose how much of the loan they will secure.

In most cases, the figure chosen is close to 20%. This is because 20% is the size of a deposit necessary in order to avoid lender’s insurance. While no deposit is needed in this case, the family guarantee serves the same purpose to the bank. Essentially, the family member is agreeing that they will be held liable for this amount of the loan if you fail to make your payments on time. They need to back up this claim using equity in a home of their own, or an investment property.

Assessing guarantor credit history is an important part of this process. Not only will the borrower be required to submit documentation. The guarantor will need to do so as well. They will also need to prove that they are financially and legally independent of you.

Benefits of a Family Guarantee

The most obvious benefit is that the borrower is not required to make a down payment in order to avoid or reduce the costs of lender’s insurance. This means that you will be able to buy a home sooner than you would otherwise be able to. You will be able to borrow for the full value of the home without any concerns, including the extra expenses (which usually amount to about 5% of the value of the home).

There are benefits to the guarantor as well. Not only are they able to help their family member buy a home, they can do so with very little risk to themselves. The situation is entirely different from cosigning a loan, which means that the family member could be held liable for the value of the entire home. They are only liable for the value that they have explicitly stated they are willing to secure.

Releasing the guarantee is also possible within a relatively short period of time. If the family member chose to secure 20% of the value of the home, for example, they could be released from the guarantee once 20% of the value of the home had been paid off. They could even be released if the value of the home increased by 20%.

To learn more about family guarantees, visit our website.

If a large percentage of your income comes from commission, you may need to apply for a commission income mortgage. This is when the lender marks down funds that you earn from commission or bonuses as a source of income that you will be using to pay for their mortgages. Considering the financial environment, it’s not surprising that the bank considers this a risky source of annual income.

Since funds earned on commission are less likely to remain steady, banks often require a definitive paper trail to assure them that the cash flow will continue. Mainly, they want to know that you have a sustainable source of income.

If a significant amount of your income comes from commission or bonuses, it is especially helpful to get in touch with a mortgage broker. Since they have contacts in the underwriting industry, they are capable of discussing your financial situation with them directly. This means that you won’t have to bother filling out a home loan application with a lender that would never consider working with you. It also means that it will take significantly less time to find one who will.

Because of the fact that a mortgage broker knows its lenders requirements, they are able to quickly identify which bank is ideal for you after collecting your financial information. Some lenders are best suited for high income borrowers with a good credit history. Others are better suited for people who have had a less than stellar financial performance in the past, and may not have as reliable a source of income.

A broker can collect all of your financial information up front. You won’t be forced to fill out an endless barrage of paperwork. Once the broker has your information, they can typically move forward from there without requiring any additional financial information.

Many brokers will continue to work with you even after your first mortgage. They will stay updated on your financial situation, and continue to monitor the lending industry for opportunities to refinance your home loan and get an even better deal.

Why are Lenders Concerned about Commission Income?

Throughout Australia, salesmen who earn a large portion of their income through commission are turned down for home loans even if their financial situation is robust. Many banks won’t even consider dealing with somebody with a commission based income. Those who are willing to work with you will most likely want two years of documentation to demonstrate the stability of your income.

Banks prefer not to work with people who are paid based on commission because the amount of money you earn each month can vary quite dramatically, and it isn’t guaranteed. People who earn a regular salary are considered more reliable.

This is not necessarily fair. There is no such thing as a “guaranteed income” after all, because even people with a regular salary can lose employment. Regardless, this is the logic used by many lenders.

The good news is that not all lenders approach the subject the same way. There are some lenders who are willing to offer a relatively competitive home loan with as little as three months of income paperwork. Working with a broker is still highly recommended, since banks who are more liberal with who they are willing to lend to often have less than ideal interest rates and terms.

Why Some Lenders Consider Commission Income Differently

Not all banks or lenders approach commission income with the risk-averse logic described above. There are many reasons to think of a salesman who earns this type of income to be very low risk. One of the most important factors is the simple fact that you can always work harder in order to earn more. The need to pay off a mortgage is also one of the strongest motivations to work harder.

Since you are only paid significantly when you make a sale, commission based earners are viewed differently from standard employees. The more they pay you, the more money they are earning. This means that people who work on commission are rarely thought of as an “expense” the same way that most employees are. When economic conditions get worse, commission based earners are less likely to be laid off than standard employees.

Finally, most people who work on commission are very financially stable. They have a keen understanding of the way that money works, and are less likely to spend money that they don’t have.

Information You Might Need

Every lender has a different application process, but many of them require similar information. To begin with, most will require documentation of your two most recent paychecks. These need to include your total income for the year, which can be used to extrapolate your annual income.

If the payslip does not include this information, you will likely be asked to provide additional income like a tax return, a letter from the people you work for, and evidence of your sales performance over a period lasting at least three months.

Many lenders will also require at least two years of tax returns and a letter from your employer demonstrating consistent income.

Find more information about commission income mortgages.

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.

The Foreign Investment Review Board (FIRB) examines applications from overseas citizens (This includes those who live in Australia on a 457 Working Visa, and subclass 309 or 820 Temporary Resident Visas) who are looking to invest in property in Australia.
If you are looking to purchase a home to live in or an investment property you may be required to obtain FIRB approval.

Who needs to obtain FIRB approval?
In 2010 the Federal Government of Australia announced new legislation which limits exemptions for foreign citizens and temporary residents looking to purchase property in Australia.
Below is a list of those who are exempt from obtaining FIRB approval:

• Australian citizens living overseas
• New Zealand citizens
• Permanent resident visa holders
• Anyone who is married or in a de-facto relationship with an Australian citizen (not a Permanent Resident)

Please visit the FIRB website for a complete list of exempt parties.

What type of properties can I purchase?

• Owner Occupied Property: If you are buying a home then you may be able to buy an established property (one that wasn’t recently built). You will have to sell your property if you move back to your home country or elsewhere in Australia – If you have obtained your permanent residency in the meantime then you will not be required to sell the property.
• Investment Properties: In most cases the Australian government will approve applications to buy an investment property on the condition that it is a new property (new development or if you buy land and build a property). You can often keep an investment property if you leave Australia.

Applying for permanent residency / citizenship

It is not known by us if owning real estate in Australia in any way affects your application for citizenship. Please refer these questions to your migration agent.

When is FIRB approval required?

You should apply for FIRB “pre-approval” once you have decided to buy a property in Australia; you can then look for a property at your leisure. Your solicitor or conveyancer will usually help you with your application for FIRB approval as part of their normal services.

We recommend that you obtain FIRB pre-approval at the same time as you apply with us for your mortgage pre-approval. To find out more refer to the applying for a loan section of our website.

Do you need help with a loan?

We are mortgage brokers who specialise in financing the purchase of Australian real estate by foreigners, Australians living abroad and people temporarily residing in Australia. This includes those who live in Australia on a 457 Working Visa, and subclass 309 or 820 Temporary Resident Visas.

Please refer to our Non-Resident Finance website for information about the loans that you may qualify for.