How To Get A Non Resident Home Loan In Australia (Foreign National)
Australia is known for having some of the most liveable cities in the world – like Melbourne and Sydney – and given its diverse landscapes, friendly locals and a long list of amazing ‘bucket list’ experiences, it has been one of the ‘must-visit’ places for travellers. It has also become one of those places non residents want to invest in using a non resident home loan.
In this article, let’s delve deeper into why Australia is so popular in the real estate segment and how non residents can get a home loan in Australia. Australian property is often lauded by investors for its ability to maintain a steady rental yield while achieving positive capital growth so it is not surprising to see the rise of foreigners investing in Australian property.
If you are a non resident and have been considering investing in Australian real estate, you’d be happy to know that there are non resident home loans in Australia which are readily available for you. However, there are some restrictions such as only being able to purchase new properties and having to get FIRB approval. Without further ado, let’s get to the nuts and bolts of getting a non resident mortgage in Australia.
What is a Non Resident Home Loan in Australia?
According to the Foreign Investment Review Board (FIRB), if you are a foreigner or a non resident in Australia, you can be considered as a non resident getting a home loan to buy property in Australia so long as you clearly understand the property market. You must also adhere to the rules set by the review board in its application process.
A non resident home loan is also a great option for temporary residents who are looking to buy property in Australia. There are lenders, banks, financial institutions, and credit groups, among others, who may be able to provide you with loanable funds which you can use to acquire property, albeit at a much stricter mortgage approval criteria compared to Aussie residents and permanent residents.
Get a free Australian mortgage assessment today.
Investing as a Non-resident Buying Property in Australia
If you are a non resident and have been considering investing in Australian real estate, you’d be happy to know that there are non resident home loans in Australia which are readily available for you. However, there are some restrictions such as only being able to purchase new properties and having to get FIRB approval. Without further ado, let’s get to the nuts and bolts of getting a non resident mortgage in Australia.
As a non resident, there is always the concern about being assessed differently from residents of Australia for an Australian non resident mortgage. It may come in the form of higher fees or increased interest rates in your non resident Australian home loan. As such, you must be prepared to accept these realities and consider if it is something that you can bear, weighing the costs and the benefits of real estate investment in Australia. If you earn an overseas income, our advisors can recommend suitable non resident home loans in Australia for your consideration.
Most lenders have non resident home mortgage packages that are quite attractive and include a unique hybrid offering or tailored-fit deal for foreigners buying property in Australia considering their exceptional circumstances, needs and preferences. It would be wise to scrutinise every feature of your non resident mortgage in Australia to ensure you are getting the best offer available.
Some costs that you must be prepared for are fees on the property inspection (approx $300-$500), foreign citizen stamp duty surcharge (an extra 3-8% on top of standard rates), FIRB approval ($5,700 for properties under $1 million), loan application fees ($700-$1000), lenders mortgage insurance (1-2% of loan amount), title search and registration fees ($150+), and legal fees for conveyancing ($1500-$3000).
It may accumulate as you progress with your purchase, so it is always good to draw up your budget before applying for a non resident home loan or home loans for temporary residents in Australia.
How Much Deposit Do I Need?
The amount of deposit required differs depending on the non resident category you belong to and the products of the lenders. Typically, overseas citizens can expect to borrow between 30% to 80% of the purchase price of the property as a foreign resident buying property in Australia. Some lenders may require a higher deposit around 40% for non residents.
Foreign Investment Review Board (FIRB) Approval
Legally speaking, non residents can be property owners in Australia if they seek and gain the approval of the FIRB. The first step should therefore be checking your eligibility as a foreign resident buying property in Australia through the FIRB website.
When your purchase offer progresses, and you have a specific property in mind, the FIRB must also be sought for another approval on that particular piece of land. There are fees involved in the evaluation, but FIRB will, most likely, grant your request, especially if your purchase will be in support of more significant economic growth in that precise location.
Getting FIRB endorsement as a non resident investing in Australian property usually takes 1-2 months. The fees can change upon the estimation of the private property or land sought to be bought. If you belong to the groups listed below, you do not require an FIRB endorsement:
- The Australian residents
- The perpetual Australian inhabitants
- New Zealand (NZ) residents
- Other exempted categories
Who are the Overseas Residents Buying Property in Australia?
Overseas residents seeking homeownership in Australia can be categorised into two groups:
- Temporary Residents (TRs): Temporary residents are those who visit the country on a temporary visa, allowing them to stay beyond 12 months. They can apply for a home loan for temporary residents of Australia with the approval of FIRB and adherence to specific requirements.
- Foreigners: Overseas citizens are people who do not have Australian citizenship and are considered foreign investors. These individuals usually have to go through the FIRB for approval before taking out a non resident home loan in Australia.
Choosing Between Lenders for a Non Resident Mortgage in Australia
Non Resident home loan options in Australia may be limited, so the best thing to do is speak to one of our non resident Australian mortgage experts to find the best solution for you. Some lenders specialise in lending to foreign investors, Australian expats, and new migrants.
Banks
Policies on non resident home loans in Australia differ from bank to bank. The bank can outrightly decline since the nature of the circumstances of non residents poses a high risk to their institution. Some banks do not accommodate clients outside of Australia.
Banks may choose to lend to non residents but with certain restrictions. It can be in the loanable amount or in the documentary requirements to support your application. Learn more about the best mortgage rates here.
Non Bank Lenders
You can also choose to deal with other non bank lenders licensed to provide non resident Australian home loans to consumers. Like banks, these institutions will evaluate your application and guide you through the entire process until settlement.
Non bank lenders are a common solution for a foreigner resident buying property in Australia as they are usually targeting this particular niche of the market so you will know your eligibility pretty quickly.
The process is also made seamless and hassle-free and they make sure the loan package is truly tailored to fit your unique needs. As a non-bank niche lender, they can give you what banks and other financial institutions cannot.
What Interest Rates Can I Get?
Thanks to the ever-evolving credit market, interest rates offered via non resident home loans have come closer to the ones given to residents, although there is still a 0.5-1% premium for non residents investing property in Australia.
Non bank lenders do, however, have a number of “risk fees” or “application fees” to compensate them for the additional risk they take by providing non resident mortgage loans in Australia.
Final Thoughts on Applying for Non Resident Home Loans
Although the current lending environment is harsh for non resident foreign nationals, securing non resident home loans in Australia can still be possible if you know where to look.
Speak with our mortgage brokers at Odin Mortgage non resident expert today to see what non resident mortgage options in Australia are available to you.
Get a free Australian mortgage assessment today.
Frequently Asked Questions
How do I get FIRB approval as a non resident who is buying investment property in Australia?
To get FIRB approval as a non resident who is buying investment property in Australia, you must first check your eligibility on the government’s website, and submit an online application through the Australian Taxation Office (ATO).
If you are eligible, the next step is to seek their approval for the specific piece of land you are interested in. It typically takes 1-2 months to receive approval. If you’re considering purchasing a home, simply take 5 minutes to complete our online mortgage assessment and get you your pre-approval letter in no time!
How much will temporary Australian residents need to pay for Stamp Duty?
Stamp duty varies depending on the state or territory you’re buying in, but most non resident buyers can expect to pay an additional 3-8% surcharge on the value of the property, on top of the standard Stamp Duty rates in that state/territory. However, there’s currently no Foreign Buyers Stamp Duty Surcharge in the Northern Territory and the ACT.
Check out our definitive guide for an in depth look at stamp duty in Australia.
Can non residents of Australia invest in property with a loan?
Yes. The Australian government is all for encouraging temporary residents to get in on the property action and buy non resident investment properties from overseas, such as Singapore.
Will the rental income from an investment property in Australia be subject to taxes after a non-resident investor buys the property?
Yes, rental income earned from an investment property in Australia is subject to taxes as per local laws. However, the income that is taxed is the net income after deducting rental expenses.
To ensure maximum deductions on rental income, it is recommended that investors take a loan from an Australian bank when buying property as a non resident.
Additionally, Australian accountants can help identify various property expenses that can be used for tax deductions, enabling investors to maximise their investment income. So, while rental income from an investment property in Australia may be subject to taxes, with the right strategies in place, investors can still reap significant financial benefits.
What documents will I need to provide when applying for a Non Resident Home Loan?
When applying for a non resident home loan in Australia, you will typically need to provide the lender with evidence of lawful residence, your passport and visa, and proof of employment income, overseas income and other assets.
Depending on the lender, you may also need to provide a copy of your credit report, bank statements, national identification and tax return.
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