How To Get A Property Loan in Australia
Buying a property is on everyone’s bucket list - it provides you shelter in a storm, warmth in the cold winter nights, light in darkness, and most importantly, a sense of freedom and security. While we all want to own a house and transform it into a snug and cosy home, many tend to be held back by the brutal housing market. But what if we tell you that there is a hassle-free method to invest in a suitable property?
Let us tell you the right way to choose the best property loan in Australia.
A little more info for you
Most Aussies, foreign nationals and temporary residents wish to invest in a property that is worth their every penny. It is always wise to ask for opinion from professionals as we can help you buy your property of choice at the best price.
Generally speaking, you could apply for loans when you have an LVR of 80% or less (check out our article on LVR to learn more about it!) as the property itself serves as security.
Property investors in Australia can claim 100% of their mortgage interest expense as a tax deduction and negatively gear their investment property. The property gives long-term returns when the property’s value increases over time. You can rent it out and receive rental income (essentially more money).
As compared to an investment in the share market, investment in a property gives you full control. It is your property, and no one can tell you otherwise, so you can make investment decisions to maximise the value of your property and make the most out of it. You can also do certain things to repay the home loan quicker (we’ll get to that in a bit).
Current lending market conditions
Different home loan options in Australia nowadays can confuse a lot of beginners which might put them off of getting one. If you are new to the real estate sector in Australia, you should reach out and have a discussion with us (it’s free).
You must be fully informed and be aware of the minimum deposit Australian lenders accept and the amount you can borrow. Lenders will consider your financial situation and other factors to decide on how much they can lend you devoid of overstretching your financial capacity.
Mortgage interest rates are at the lowest point in history.
The Reserve Bank of Australia (RBA) has stated we will be in a low interest rate environment until 2024. Inflation rate is to be between 2-3% and job growth to return to pre-COVID levels before rates start to increase again.
You’re able to get a 30-year loan tenure regardless of age.
You’re able to do Interest-Only repayments with a slight premium, although the majority of clients are opting for Principal & Interest.
How do you get a loan to invest in property?
Comparing the cheapest home loan interest rates in Australia is something we will help you do. You can talk to one of our mortgage experts so we can provide you with options that cater to your needs.
Next up is to complete our quick online assessment, you will then receive a comprehensive assessment with your maximum borrowing capacity and lender options, with rates and fees.
Once you have decided to proceed with the home loan application, you will be guided through our quick and easy document collection process for application submission. We strive to provide you with the most stress-free experience.
Buyers would only be required to provide basic documents, such as passports, driving license copies, income certification letters and the first page of the house purchase contract. Up to 80% of loans are approved. The interest rate and product functions are precisely the same as those of local Australian customers.
Australia's developed financial industry has made Aussie expats even more powerful, and some support is not even available for local buyers. If the buyer is allowed to only pay interest in the first five years, the principal can be put on hold temporarily, so the buyer can easily "provide a house with a house"; if the house appreciates, there will be no need to sell the house and do a reassessment. It is very convenient to cash out the value-added part, turning "dead money” into “living money” and realise a rolling investment.
Most Australian financial institutions provide 80% of housing loans with some financial institutions lending more than 80%, and 50-60% of the purchase price for commercial properties. But for loans higher than 80%, you must pay a certain percentage of mortgage insurance which may be quite hefty. This one-time fee goes towards the lenders for covering them when the borrowers do not make the repayments.
Owner-occupied Housing/ Investment Housing Loans
Unlike many countries, the Australian housing loan interest rate can be divided into two types: Owner-occupied Housing Loans and Investment Housing Loans, depending on the purpose of the buyer's purchase. The interest rate for investment housing loans tends to be slightly higher than owner-occupied housing loans. Generally, as an Australian expat, you will be buying for investment as you are not currently residing in Australia to live in the property.
Interest Repayment Only
By choosing this loan method, the lender can repay the interest only for each repayment within five years. The amount is relatively low and it will be completed at maturity. This kind of repayment method is suitable for buyers who are purchasing for investment purposes. Investors expect that real estate will increase rapidly. In three to five years, the value of houses will skyrocket.
Home loan rates Australia
More than 70 banks and financial institutions in Australia are giving loans, and nearly 80% of customers are choosing the four central banks.
This is despite the four central banks in Australia having a higher average housing loan interest rate. You can check the current interest rates for the big four banks here.
Relatively smaller banks and small lenders often offer relatively lower mortgage interest rates, as is required to compete with the large network effect and online banking capabilities of their larger competitors. Oftentimes, these smaller lenders offer a better cost-saving alternative and should not be ignored.
The Australian Competition & Consumer Commission (ACCC) released an interim survey report on the lending rates of Australia's four central banks and Macquarie Bank (Macquarie) and found that the mortgage information released by significant banks to mortgage customers was "not transparent”, hence before you make a quick decision to go with the big banks, do come to us and see whether you would benefit more by borrowing from lesser known lenders.
Cheapest home loan interest rates in Australia
On November 3, 2020, the Reserve Bank of Australia (RBA) announced the lowering of the official cash rate from 0.25% to 0.1%, a record low. The purpose of the interest rate cut is mainly to stimulate the economy out of the technical recession caused by COVID-19 epidemic.
Traditionally, Australian housing loans are mainly floating rate (variable) loans, which can be linked to offset transaction accounts. Variable loans can also be refinanced at any time, as opposed to fixed loans which have "locked-in" terms with break-cost penalties.
Since the November 2020 rate cut, all four major Australian banks, Commonwealth Bank (CommBank), Westpac Banking Corporation (Westpac), the Australian and New Zealand Banking Group (ANZ) and the National Australia Bank (NAB) have reduced interest rates substantially on their fixed-rate and variable-rate mortgage products.
Smart and successful lenders in Australia have their own metrics and qualifications for assessing the loan applicants. They focus on so many important aspects of the home loan applicants and follow different terms and conditions. There is no specific formula or rule on how much the home loan applicant will be approved for.
Some of the important factors Australian lenders consider while deciding whether the applicant is qualified for the loan are the borrowing capability of the applicants, purpose of the loan, property prices, credit history, and other things. Our articles on how to maximise your borrowing capacity as an overseas resident earning foreign income is a must-read.
Home loan calculator
Use different calculators to help you calculate your ability to borrow, the cost of house decoration, monthly payment and stamp tax.
Our online home loan calculators can provide you with a complete guide and will provide suggestions on how to make an informed decision to qualify for a home loan. You will get a basic idea on home loan which would help clarify some doubts you might have.
Guidelines for qualifying home loan in Australia these days catch the attention of everyone and increase their overall interests to directly submit an application for a home loan.
There are several things you should pay attention to: your credit history, commission as income, mortgage brokers, proven savings, affording repayments and credit card transactions.
We will save you the hassle and have a thorough inspection of all your documents while appraising your application and help you decide on which home loan to go for.
Can foreign nationals get property loan in Australia
The Australian government has always been supporting the real estate industry as it is one of the primary pillar industries in the Australian economy. One of the most important policies is encouraging people overseas to buy Australian real estate as part of their investment portfolio.
When you buy a house in Australia, you can enjoy the same policies as Australian residents, that is, national treatment. As long as the buyer is not a person that the Australian government considers harmful to the national interest and the property purchased is not a historic property that is prohibited from being sold on the Australian historical and cultural heritage list, your application is usually approved within two weeks. From this point of view, the requirements for overseas buyers are very lenient. They can choose where to buy, what to buy, and how many sets to buy.
Note that Australia restricts the types of properties that foreign buyers can hold. For example, foreigners can only buy off-plan and first-hand new houses; international students can buy homes, but they can only live by themselves and not rent out if there is no identity or stay after the visa expires. If you start working, you must sell the property.
The only real difficulty is from a financing perspective. While the Australian government is largely fine with foreign nationals buying properties, the banks and lenders have to follow stricter guidelines on who they can lend money to - for this reason, it has become tougher for those without Australian passports to get loans. Most foreign nationals should prepare for an LVR of 60-70% with slightly higher interest rates or fees.
The process of applying for a loan and buying real estate in Australia while being away from home can be quite confusing and daunting, but don’t you worry. We are here for you and will guide you through the process. We will work out which lender can offer you the best interest rates and terms and conditions and advise you of your prospects of obtaining finance so, we got your back.
7-minute read Estimate the stamp duty cost of your property purchase, or learn about foreign stamp duty surcharge and whether that applies to you.
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