Home Loan Rate – Australia

If you are classified as a temporary resident of Australia with a 457 visa, there are certain obstacles that you may face which can make applying for a mortgage more difficult. Buying a home is never a simple process, and it certainly doesn’t get any easier if you are considered a foreign citizen. That said, a more complicated application process shouldn’t be enough to discourage anybody from buying a home, which is one of the most rewarding financial decisions that you will make in a lifetime.

Deposit

The first obstacle that you are likely to face is the deposit. Many Australian citizens can apply for a loan with a small deposit, or no deposit to speak of. If you are staying in the country on a skilled workers visa, this typically is not an option, In most cases, you will be required to make a deposit worth 20% of the value of the home. For a $200,000 home, this would be $40,000.

The expenses associated with buying a new home amount to about 5%, so it is generally a good idea to save up about 25%. In the example above, the extra 5% would be $10,000, bringing the total that you should save up to $50,000.

While this obstacle may be frustrating, it may actually be for the best in the long run. Those who have the opportunity to apply for a mortgage with a smaller or nonexistent deposit will also pay a higher interest rate, and be required to pay for the lender’s insurance that the bank needs to protect itself against the threat of foreclosure.

If you have been working at your current job for more than a year, it may be possible in some circumstances for you to apply for a mortgage with only a 10% deposit. You will typically need to work with a mortgage broker who offers this type of deal in order to qualify.

Options

Not all lenders will be willing to work with somebody who is in the country on a 457 mortgage. Many banks consider you to be too high a risk. Fortunately, the banks that are willing to work with you will tend to treat you the same way that they would treat a citizen. As mentioned above, their will often be limitations on the size of your deposit, but beyond that the interest rates and terms of the home loan should be essentially the same.

Since it can be somewhat difficult to find these lenders, it is a good idea to get in touch with a mortgage broker. Brokers have contacts in the lending industry, and know exactly which banks are willing to work with you and your situation. This saves you the time that it would take to shop around and find a lender that is willing to work with you. Brokers also know which lenders offer the best interest rates. There are even some brokers available who specialize in working with immigrants and temporary residents, which helps the process run even more smoothly.

Government Involvement

Another thing to be aware of is the Foreign Investment Review Board, known as FIRB. Since you are not a resident of Australia, you need to apply for approval from FIRB. This may sound somewhat concerning, but rest assured that nearly all applications are approved. Still, it is worth understanding the involvement of this government organization.

To begin, you are not prohibited from purchasing either old or new property, as long as you plan to live in the property yourself. If you leave the country, you will be required to sell the home. If the property is old, you can’t buy it unless you are going to live in it.

Another thing to keep in mind is that your own personal financial situation has no bearing on FIRB approval. The board only considers your residency status and the type of property you are considering buying.

The process of applying for approval from the board is relatively simple. The form is only about three pages in length. As long as you are buying the home for your own personal use, and not as an investment, you shouldn’t have any problems. If you are buying the property for investment, you still won’t tend to have problems as long as the property is new.

Can You Receive a Grant?

In most cases, you will not be eligible to apply for the First Home Owner’s Grant (FHOG) unless you are an Australian citizen or permanent resident. There may be an exception if you are buying a home with somebody who is a resident or citizen.

Learn more about 457 visas.

Have you recently arrived in Australia and are looking to purchase your own home?

You may be disheartened by financial institutions that keep turning you down. The simple reality is that many banks see you as a higher risk because you are not as financially committed to staying in the country as an Australian Citizen or Permanent Resident. However not every lender has strict lending policies for foreign citizens living in Australia.

With the right expert advice your dream can actually become your reality! The trick is to speak to a mortgage broker such as The Home Loan Experts, who specialises in temporary resident mortgages, and knows which lenders will approve your loan.

Getting a Pre Approval

A Pre Approval is free! So why not approach a mortgage broker to see if you will qualify for a mortgage in Australia?

Once you have a Pre Approval you can start looking for a property to purchase that you can call home.
There is nothing more discouraging than finding that perfect place and then discovering that you are not able to get a home loan or you are not able to borrow as much as you thought. By sorting out your finances up front you will be free to shop for a property at your leisure.

Do I need FIRB approval to qualify for a mortgage?

Yes, you will have to obtain approval from the Foreign Investment Review Board (FIRB) to acquire formal approval for a mortgage. We recommend you seek FIBR approval at the same time as applying with a mortgage broker for pre approval of your mortgage.

Just like with your home loan, you can get pre approval from the FIRB to buy a property. Please note that as a temporary resident there will be restrictions placed on your purchase. For example if you decide to move back overseas then you may be required to sell the property.

If you are purchasing with an Australian Citizen and you hold either a Partner Temporary Visa (820/801), Partner Visa (826/814), Interdependency/Provisional Visa (310/110), Partner Visa-Temporary/Offshore Visa (309/100) then with some banks their standard lending policy will apply. In this case a loan for 95% LVR (95% of the purchase price) is available and FIRB approval is not required.

However if you are not buying with an Australian Citizen or Permanent Resident then lenders may restrict the amount you can borrow because you have less commitment to stay in the country. The most common type of temporary residents that buy a home in Australia on their own are 457 visa holders. For more information please refer to the Temporary Business (Long Stay) page on the Home Loan Experts website.

What happens next?

Once you have found a property that you would like to purchase, and FIRB approval has been granted, you can then make an offer to purchase the property. After your offer is accepted then you will obtain final loan approval, final FIRB approval and will complete your strata (if required), pest and building inspection. The property will normally transfer into your name around six weeks after you sign the contract, depending on which state you are buying in.

Although the process of buying a home can be a little frightening when you are in a new country, you will find the final result is worth the effort. Your conveyancer and mortgage broker will work together to ensure the process is as simple and stress free as possible.