Found your dream home?

Moving to a new country and buying a home can be a daunting task. Without knowledge of the local real estate market or an understanding of the legal system, it is easy to make mistakes. Otto Dargan from the Home Loan Experts specialises in home loans for Australian temporary residents; here are his essential tips for foreign nationals buying property in Australia.

1. If you are not a Permanent Resident in Australia, you may require approval from the Foreign Investment Review Board (FIRB) before buying a property. Understand your rights before starting your property search. Here are some of the most common scenarios allowed by the FIRB;

  • The FIRB allows foreign citizens living overseas to buy an investment property in Australia as long as the property is brand new. You are also allowed to buy land and build a new property.
  • Temporary residents are typically allowed to buy a home to live in, but must sell the property when your visa expires. In the meantime, if you obtain Permanent Residency you are allowed to keep your property.

2. Before starting your property search, find a conveyancer or solicitor. A conveyancer, solicitor or settlement agent (in Western Australia) takes care of the legal paperwork. They review the contract of sale, order property inspections, liaise with the vendor, and help obtain FIRB approval. A conveyancer will cost between $800 and $2,000.

3. Before starting your property search, select a mortgage broker. Your mortgage broker will complete a credit and needs analysis to calculate which loan products suit your situation. In most cases you will not pay a fee for the mortgage broker as the banks subsidise their services. Some banks do not accept applications from foreign citizens under any circumstances. Selecting a mortgage broker who specialises in home loans for foreign nationals will ensure you apply with a foreigner friendly bank.

4. Start saving! You will need funds to make up the difference between your mortgage and the purchase price of the property (your deposit). In most cases you will need 10% to 20% of the purchase price. Australian lenders love to see someone that can save a deposit on their own. Foreign nationals who intend to purchase property in Australia should open an Australian bank account, move funds you have overseas into the account, and continue to add to these savings on a regular basis. Once you have a three month history of “genuine savings” you will be seen as a low risk by Australian Banks.

5. In addition to your deposit, allow 4% to 5% of the purchase price to cover the costs associated with buying a property in Australia. The majority of this is stamp duty paid to the state government. This figure also includes conveyancing fees, registration fees, mortgage fees, and inspection costs.

6. How much can you borrow?

  • As a general rule if you are foreign citizen living overseas or a temporary resident of Australia you can borrow up to 80% of the value of the property.
  • If you are a temporary resident and have been in your job for 12 months then a select few banks may lend you up to 90% of the property value.
  • If you are married to or defacto with an Australian Citizen or Permanent Resident then you may be able to borrow up to 95% of the property value.
  • Permanent Residents may borrow up to 95% of the property value.

7. Avoid making too many applications for a mortgage or credit card; this will damage your credit history and banks may regard you as a “credit junkie”. You should put in one application for a mortgage and get one approval. If you want to shop around then do it by speaking to the banks, not by lodging multiple loan applications. Most Australian banks cannot access your foreign credit file, however you are usually not required to have an established credit history in Australia to get approval for a mortgage.

8. Your living expenses will be taken into account when assessing your ability to afford the debt. This includes a notional living expense for you, your spouse and the children you have. In addition to this they may take into account private school fees, health insurance, gym membership, pay TV subscriptions and other expenses.

9. Foreign citizens and temporary residents are not eligible for first home buyer concessions such as the First Home Owners Grant (FHOG). These are only available to Australian citizens and Permanent Residents. Some states have concessions for people buying a new property, or who are building a property in a country town. You should refer to your conveyancer or solicitor for more information about any government incentives you may be eligible for.

10. Always obtain a pre-approval for your home loan before making an offer to buy a property. If you sign a contract, and then can’t come up with the funds to buy the property, you may lose your deposit or be sued by the vendor.

About the Author: This article was contributed by Otto Dargan from Home Loan Experts. His company specialises in finding the best mortgage for temporary residents on a spouse visa or 457 work visa. Thank you Otto!

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