Obtaining a mortgage in a foreign country can be hard, and research itself can be difficult too! Often there is too much information available, and it can be spread out thinly in many different places.
The professionals there to help are often working in their own self interest too (particularly in the US). However, it does not have to be that way!
Mortgages in Australia can be easy!
Mortgages in Australia can be far easier and less stressful than other countries. As most regulations are nation wide and not state by state (like the US), it is easier for websites and brokers to bring together the information for you.
Australian professionals such as mortgage brokers are also bound to far stricter rules and regulations than those of other countries. They are therefore more likely to find you a mortgage with great terms and competitive rates. Mortgage broker services are mostly free for residential loans too!
Our brokers specialise in Australian mortgages and work with over 40 different lenders. You can contact us on 1300 889 743 (when outside Australia call +61 2 9194 1700), or enquire online.
What are some features of Australian mortgages?
There are many common loan features available for Australian mortgages. Australian mortgage brokers work with many different banks and lenders and know what each lender offers.
Mortgages often come as a banking package known as a professional package, where you get a discount. Payments for your loan can be made monthly, weekly or fortnightly, and are normally deducted automatically from an Australian bank account.
Additional repayments are allowed on variable interest rate loans, while restrictions apply to fixed loans. You are allowed pay off the interest in advance, however in most cases only for up to 5 years.
Are redraw and offset accounts features of Australian mortgages?
You can redraw your additional repayments on variable interest rate loans. However, as above, restrictions will apply to some fixed rate loans. Offset loans are also available including 100% offset home loan accounts.
In the USA and UK in the late 1990’s it became popular to refer to 100% offset mortgages (known as Flexible Mortgages / Current Account Mortgages) as “Australian Mortgages” as this type of loan originated in Australia in the early 1990’s.
Are there flexible interest rates?
Over 80% of mortgages in Australia are variable, which is similar to the USA’s adjustable rate mortgage (ARM). Fixed interest rates are available for up to 5 years. This will normally vary from lender to lender, and will revert to a variable rate at the end of the fixed term.
The long term average interest rate for Australian mortgages is about 7%. However, in the last ten years it has deviated between 5% and 9.5%.
Which bank or lender will accept my application?
Many banks will not lend to temporary residents or non-residents, regardless of their financial and/or asset position.
This is for several reasons and this mostly has to do with risk:
- It can be difficult to track down an overseas borrower if they stop making their mortgage repayments.
- Banks tend to be averse to approving equity releases because it can be difficult to determine what you plan to do with equity.
- Even if you’re a temporary resident of Australia, these visa programs can change on an unpredictable basis so banks are concerned that you could be forced to leave the country and sell your property.
- Verifying assets and income overseas is difficult because of differences in income and financial documents and foreign tax systems.
- Unstable overseas government or countries with strict policies about citizens sending money overseas, such as China.
- Unless you’re married or de facto with an Australian citizen or permanent resident, banks are wary of approving borrowers with less than a year left on their visa.
Not all lenders are the same!
Luckil, mortgages brokers like us know banks that will lend to most non-residents, foreign citizens and Australian expats.
For more information you can see our pages on temporary resident mortgages, foreign citizens, or Australian expatriates.
Do you have real estate or property in mind? Contact us today on 1300 889 743 (when outside Australia call +61 2 9194 1700), or enquire online.
How much can I borrow?
Borrowing up to 80% of the property value (80% LVR) is considered a low risk by most banks and is relatively straightforward.
However, borrowing above 80% LVR constitutes a greater risk for the lender. Therefore whilst possible, it may require lenders mortgage insurance (LMI) premium to be paid.
How much banks will lend to you depends upon many different factors including:
- Your credit history
- Your proof of income
- Your savings
- Your visa status
- The length of your stay
- And many more.
Most lenders willing to assess your situation will consider 80%LVR (LTV in the US). However, applying to borrow above this value will decrease the possibility of approval, and may increase the cost of your loan.
How else can Australian loans differ?
You must prove that you can afford the loan prior to it being approved.
This typically means that you must provide evidence of your income, such as two recent payslips.
If you are a foreign citizen or temporary resident (including those on a 457 visa or a Temporary Skill Shortage (TSS) visa), you will also need Australian Government approval from the FIRB (Foreign Investment Review Board).
Do I always need FIRB approval?
No! There are exceptions which you can find on the FIRB approval page.
You don’t need FIRB approval if:
- You’re buying the property with an Australian citizen as joint tenants (not tenants in common) and you’re in a spousal relationship.
- You’re buying an off the plan property developer that has obtained a New Dwelling Exemption Certificate for the unit that you are buying.
- You’re a permanent resident so if you will soon be getting your PR, you’re often best waiting so you can not only avoid FIRB but qualify for a home loan with more lenders.
- You’re a New Zealand citizen.
Make your repayments on time!
Australian lenders are very strict about making repayments on time. You should make all of your payments on time every time. Even just one payment default per year on a 30 year loan could see you paying tens of thousands more in interest and late fees.
Lenders must know if your situation changes
It is the borrower’s responsibility to update the lender if they change their address or contact details. If you are overseas (living outside of Australia), then some lenders will require you to have an Australian mailing address and a nominated person in Australia to act on your behalf. They may be required to hold a Power Of Attorney (POA).
Australian mortgages are non-transferable
You cannot transfer an Australian mortgage to someone else. Banks need to know that the person liable for the mortgage can afford the repayments themselves. If you sell the property, the buyer must apply for their own loan.
Mortgage brokers are commonly used in Australia
It is common to use mortgage brokers in Australia. There are several mortgage brokers such as ourselves who specialise in lending to temporary residents, foreign citizens (USA, UK, Singapore and NZ are most common) and Australian expatriates.
Australian banks are very safe!
Australian banks have excellent ratings and are some of the safest in the world. This is due to prudent regulation and the supervision of ASIC, APRA and the Banking Association.
In 2010 credit licensing introduced additional responsible lending rules which made the banks even safer. In fact, typically at any one time less than 1.5% of Australians are missing the repayments on their home loans. This is one of the lowest rates of arrears in the world.
Call us and apply today for an Australian mortgage!
Looking to purchase your own Australian property? We specialise in helping temporary residents, foreign citizens, and Australian expatriates. Contact us today on 1300 889 743 (When outside Australia call +61 2 9194 1700), or enquire online.