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.

The mortgage landscape in Australia may differ to that of your own country. The laws and regulations are different and the process itself may involve steps you are unaware of and unprepared for.

Here are five tips to help you on the way to owning your own Australian property or real estate.

1. Make sure you prepare all necessary documents

When applying for a loan you need to make sure you have all your documents prepared such as tax returns, payslips or an employment letter, and bank statements.

As you are not an Australian resident you may also need other things such as your passport and proof of your visa status.

If you do not provide these documents the banks are unable to assess your situation and will decline your application.

2. You will need Government approval

Australian Citizens and permanent residents do not have to apply for approval. However as a non-resident or temporary resident you need to contact the Foreign Investment Review Board (FIRB) to obtain permission to purchase Australian real estate.

3. Have your loan pre-approved!

Pre-approval is very important as it removes a lot of risk when looking for a home. Without pre-approval you do not know whether you are eligible to borrow. You may end up spending a lot of time searching, only to miss the property you desire because your loan application did not go through in time or is declined altogether.

4. Have the right professionals ready to help

Without the right help buying property in Australia can be next to impossible. A conveyancer is needed in order to transfer title (ownership) of the property. Remember that your conveyancer must be licensed in the same state as the property..

You can also use a solicitor, however be aware that unlike a conveyancer, they may not specialise in the laws and regulations that surround the purchase and sale of a home or investment property.

5. Apply through a mortgage broker!

As they work with many different banks and lenders, a broker can pick and choose who to apply to. They know their lending policies, and can determine whether or not a specific bank will decline your loan.

Once they have determined the best lending candidate they mediate for you. Not only do they apply where you are most likely to be approved, more lenders to apply to means they may also be able to find you better deals with lower rates.

For most residential loans their services are also FREE as the lenders, not you, pay mortgage brokers for their services.

A mortgage broker is basically essential to the process. You can apply directly to a bank yourself, however brokers offer you a far greater chance of approval and of a better deal than if you apply directly to a bank or lender.

Apply online today!

Are you a foreigner or expatriate looking to finance property in Australia? You can find out more in the non-resident mortgage section of our parent website, the Home Loan Experts.

Do you have a property in mind? Then contact us today on 1300 363 843 (+61 2 8668 4038 when outside Australia), or enquire online.

Home buying requirements are strict, and many people find that they are unable to qualify.

Even if you know that you can afford the monthly payments, it can be difficult to get a lender to see that. Fortunately, a guarantor can help you convince the mortgage companies to approve the loan, allowing you to move into your dream home.

1. Income Requirements

The top concern of most lenders is your ability to make your repayments. If your income levels don’t meet their expectations, then they will not approve your loan. However, if your parents are willing to sign on as guarantors, then the banks can consider their income.

They may have to use their property as security on the loan, and they will be held responsible if you default for any reason. Ideal for someone with lower income levels or higher debt levels, it can help you get the property you want.

2. Limited Guarantee for Easier Approval

There are times when the approval could go in either direction. When requirements are barely met or there are other concerns, the bank might want a little extra security before approving the loan. With a limited guarantee, the guarantor takes on partial responsibility for the loan.

They won’t be responsible for the full amount, but their willingness to take on part of it will boost your chances of approval. It is a great way to reduce the loan-to-value ratio or meet income requirements.

3. Service and Security

Some borrowers may have trouble meeting the requirements regarding income and deposit. When the banks are worried about you making monthly payments and there is a small deposit, the answer will probably be a resounding no. However, your guarantor can step up to the plate with a promise to help.

4. Affordable Payments

Lenders mortgage insurance, or LMI, can be a large up front payment. When you have a guarantor willing to use their property as security, you can avoid this expense. The home you love becomes more affordable when the bank does not have to charge that additional insurance.

With their assistance, the % of the value of the property (% loan to value ratio or LVR) you can borrow, may be higher. The finance company will be more comfortable providing the loan, and you can move into your dream home.

5. No Deposit Home Loans

The biggest challenge of buying a home is often saving the deposit. However, with a no deposit home loan, you don’t have to save thousands of dollars. With help from your family, you can get the property you want and finance the full purchase price.

When your parents agree to guarantee the loan, they are essentially using their own property to secure your new mortgage. With another property available to help cover the mortgage, most lenders are willing to waive deposit requirements. It is a common way for first home buyers to get the property they are interested in, and it is one of the ways a guarantor can help you get a loan.

Getting a guarantor makes it easier to buy the property you want. You can achieve your dream of home ownership without having to save up a large deposit, or pay for insurance.

Do you have a property in mind? If you are fortunate enough to have someone willing to sign as your guarantor, instead of going directly do your bank you should contact a mortgage broker. A broker with access to many banks and lenders has more chance of getting loans such as a no deposit home loan approved at competitive interest rates.

An interest in advance loan enables you to pre-pay the interest of the loan for the following financial year. These are available from a number of different lenders with fixed rates for a period of up to 5 years.

As a borrower there are two benefits you can receive; rate discounts and tax deductions. The first is a discount on the interest rate as the lender has your payments earlier.

In some cases the lenders will allow the rates to be fixed for longer which is beneficial in a period where they are rising.

Tax deductions are the main reason people opt for interest in advance loans. Paying the sum before the end of the financial year allows investors to reduce their taxable income for that year and therefore pay less tax.

1. Who can apply for a loan?

Generally these loans are only available to investors, and to people who switch to a fixed rate when refinancing their mortgage. If your loan is not tax deductable there is a far smaller savings benefit and therefore little reason to pay your interest in advance.

2. How much can I borrow?

Most lenders are willing to loan up to 80% of the property value (80% loan to value ratio or LVR). This is especially true if you are also borrowing funds to pay the interest in advance.

With LMI (lenders mortgage insurance) however you may be eligible to borrow up to 95% LVR.

3. How much can I save?

As mentioned above this type of loan has two types of savings;

• Discount interest rates: Generally you can save between 0.15% and 0.20% off your rate.
• Tax deductions: If you own an investment property or are refinancing, you should be eligible to apply for tax deductions. Paying your interest in advance therefore lowers your taxable income for the current year. This means you pay less tax. How much you save depends upon how much you can deduct.

4. You can borrow to pay the interest.

As lenders require you to pay in advance, you are unable to proceed if you cannot supply these funds. Some lenders therefore will allow you to borrow the funds to pay the interest for the following year.

By doing this you free up your funds for other purposes, however you must make sure that the tax and interest rate savings you have on your loan outweigh the cost of borrowing the payments.

5. What are the disadvantages?

Unlike with other types of loans the additional repayments you may make on the loan are restricted. It can also be difficult to get features such as redraw, 100% offsets and portability.

6. Where can I find more information?

Not all banks and lenders allow you to pre-pay the interest on your loan. Mortgage brokers that work with many different lenders and specialise in areas such as interest in advance home loans will know their lending policies. Thy will be able to guide you in the right direction and find you a lender with which you have the best chance of being approved.

It is also important to speak to your financial advisor such as an accountant or taxation agent. They should be able to give you a good idea whether this type of financial product will suit you and your taxation requirements.

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.

What is NRAS?

In 2008, the Australian Federal government, along with commitments from states and territories, initiated the National Rental Affordability Scheme (NRAS). NRAS legislation represents a long-term plan aimed to provide new rental housing to low and moderate-income earners at affordable costs.

Under the NRAS, potential investors are urged to buy an NRAS approved dwelling and agree to rent the property out at 20% below the local market home rental rate.

As an incentive to encourage large-scale investment in NRAS approved properties, the government offers either a grant or a tax exemption for up to 10 years. Based on present criteria, the Australian Government has identified more than 1.5 million national households as potential tenants eligible for NRAS assistance.

What are the Incentives?

The National Rental Affordability Scheme is a national opportunity for a property investment that provides financial incentives that combine both a potential real gain and a tax rebate. Investing in an NRAS approved property can currently provide up to almost $10,000 in state and national tax tree incentives.

The NRAS agreement is secured for 10 years, but the property must remain approved for the benefits to continue. When the agreement ends, the investor is free to on-sell the property or rent it out at market value. Prior termination will incur a penalty unless the buyer agrees to continue the obligations under the NRAS agreement.

Investing in an NRAS Property

NRAS is aimed at large scale not individual investment. Obtaining NRAS approval of properties and maintenance of that approval is complicated legal process. Consequently, investors usually purchase an NRAS approved dwelling from a NRAS approved consortium.

Consortiums consist of two or more investors that purchase or construct a home development that will meet the NRAS requirements. Consortiums can take different legal forms. Non-Entity Joint Venture, Head Lease Structured and Real-Estate Delivery Agreement Consortiums are most common.

Typically, the consortium provides the funds to finance a housing development and obtains NRAS approval. The individual investor then purchases one or more of these properties as their investment and gains the benefit of the NRAS incentives and any future potential property sale. Usually the consortium maintains the property. The individual is responsible for claiming their NRAS tax rebate in their tax return.

How to Finance an NRAS Investment Purchase

Finding a loan to finance a purchase through consortium can present difficulties. Experienced national mortgage brokers that specialise in NRAS approved properties can assist the investor in obtaining financing based on their income, employment, property type and property location.

Getting approval for a loan largely depends on how banks and lenders view NRAS properties and the particular consortium through which an investor chooses to invest. Banks and other lenders investigate the legal structure and contractual policies of consortiums with their investors and determine how the policies impact the security position of the property. After evaluation some lenders may label certain NRAS consortiums as high-risk investments.

Although some banks and lenders approve many consortiums with a “headlease” structure, many lenders favour consortiums that are structured as non-entity joint ventures. Every investor should consult with their financial advisers and mortgage brokers to determine the right product for them.

A mortgage broker can help you finance your loan

A mortgage broker experienced in obtaining loans for NRAS properties will know the NRAS consortiums and their potential lenders. Additionally, the broker can help frame an investor’s application in the most favourable light for their situation and the lending guidelines of the banks.

The broker can work with banks to obtain a mortgage with a Loan to Value Ratio (LVR) of up to 90% plus Lenders Mortgage Insurance (LMI). In some cases, lenders can be found that will consider a portion of the tax incentive in assessing the investor’s ability to repay the loan.

Saving a deposit for a new home can be quite stressful, especially if you are trying to save ten or twenty percent of the value of the property. These 5 essential tips should help bring you closer to owning your own home.

With a guarantor you may even qualify for a no deposit home loan! Read on to find out more.

Have as little debt as possible! Before applying for your loan, pay off your debts, or at least have some money left over after each monthly payment which you then can save each and every month.

Banks and lenders do not like their customers paying out large sums of money on other debts. They also make saving your deposit far more difficult to do.

Consolidating all your debts into one monthly payment is a great first step and it may also help you move away from those high interest repayments such as credit card debts. Next, prioritise your repayments over and above your other expenses, other than essentials such as water and electricity. You will pay them off faster and at the same time prove to lenders that you can manage your debt well.

Make a budget for all your expenses. Monthly expenses such as rent, food and utilities bills are a large drain on your finances. Make a budget and calculate exactly how much you must spend each month. Include any current debts such as credit card repayments as mentioned above. Once you have done this it will be far easier to keep track of your spending habits and keeping your living costs down.

Transfer your earnings automatically each month. Once you have taken the above steps you should find you have more money left over at the end of each month. A great way to save a set amount of money each month to have it transfer to a savings account just after you receive your pay.

This should be easy to work out after you have created your monthly budget. Many banks and lenders offer easy to use solutions here. It is also useful to have your savings account NOT connected to a debit or credit card. This way you cannot withdraw the money on a whim.

Remember to factor in Lenders Mortgage Insurance (LMI). Lmi guarantees the lender if you fall into difficulty and cannot service the loan. LMI is a cost not included in the deposit. Therefore for a mortgage where you borrow at least 80% of the property value, you need a 20% deposit and you may need to pay Lenders mortgage insurance. This can come to a few thousand dollars.

As an example; on a $100 000 loan you may pay $1000 insurance. A lender will normally loan you $99 000 for the mortgage and keep the rest . Keep this in mind when considering your deposit. When using a guarantor as security for your loan a lender may waive the requirement for LMI.

If your parents can act as guarantor you are eligible to apply for a no deposit home loan! Your parents can use the value of their property as a guarantee for your loan. Some lenders are willing to waive the requirement for savings due to the extra security their home provides. With a successful application, this will enable you to borrow 100% of the value of the property and possibly even more.

There are other ways you may be eligible for a no deposit home loan. Follow the link to read up on what they are and how you may apply.

What is a Warehouse Conversion?

Old warehouses can often lie unused by businesses and developers often come in, purchase them and then convert them into large, open plan apartments. Once developed they are sold on to the public, often for large sums of money.

They are also known as commercial property conversions or industrial conversions and lenders see them as the same types of buildings when considering a loan application. Therefore in general the same lending policies apply.

Banks can be conservative

There are a number of reasons banks have stricter lending criteria for converted warehouses. These can include but are not limited to;

• Banks see higher risk due to inflated sales price from overzealous marketing.
• Apartments sometimes have unusual and unique designs with limited appeal
• Warehouses are often located in industrial, not residential areas.
• A conversion containing more than 30 units such as those near or within a CBD may be considered a high rise building. This limits the amount you can borrow from some lenders.

Banks, lenders and how much you can borrow

Not all lenders have these policies however and as long as you have a good income coupled with a strong financial position a good Mortgage Broker should be able to find one for you. A broker working with many different lenders is the best option as they would have a far greater chance of finding a lender willing to work with you.

Once a lender is found how much you can borrow depends upon what type of buyer you are and the type of loan you are after. For example an investor can borrow up to 95% of the property value (95%LVR), whilst those looking at a low doc loan can usually only borrow up to 80%.

First home buyers may be eligible for warehouse conversions loans up to 95% however restrictions apply. As is the case for many loan types basic loan discounts and competitive professional packages are available. No matter your situation some lenders also give up to 95% loans on a case by case basis.