It seems barely a day goes by without the subject of mortgages and home ownership in Australia being raised.
Every month, we wait with bated breath as the Reserve Bank of Australia announces whether or not the national cash rate will be altered. Much of this depends on circumstances in the global economy, and as of December 2014, the rate remains at 2.5 per cent. This is on the low side, which is great news for people who are looking to get a foot on the property ladder.
As a leading migration agent in Perth, True Blue is constantly being bombarded with questions about the best ways for expats to secure a mortgage. Many people mistakenly think that home ownership is the sole preserve of fully-fledged Australian citizens, but this is certainly not the case. Of course, there can be major differences between Australian mortgage laws and those of the countries from which our clients have relocated from, so it’s important that you are familiar with how things are done Down Under.
This handy guide should give you a better idea of what expats need to do to realise their dream of owning their own home in Australia.
Borrowing money as a 457 visa holder
Applying for a mortgage can be more complex for a temporary resident, but it’s certainly doable. Let’s break the process down into ten simple stages, before adding a bit more meat to the bones.
1) Get approved – In the vast majority of cases, the first thing you need to do is seek approval from the Foreign Investment Review Board (FIRB). Whether you plan to live in Australia yourself or you just want to invest in property there, the FIRB will ultimately give their blessing to each applicant, which lets the Australian Government know that you’re not a risk.
This is understandable, as the last thing the authorities need is a multitude of people from all over the world defaulting on mortgages in Australia. It wouldn’t take long before the banks collapsed into an embarrassing heap if this process became the norm.
2) Do your research – Once you’ve established that you’re eligible to buy property Down Under, make sure you have a clear idea of where you want to live. While your personal circumstances – family and job – are likely to dictate this, you need to be aware that property prices vary dramatically depending on where you are looking. We’ll cover this later.
3) Have you got the cash? - Before you submit your mortgage application, you need to assess the state of your own finances. We’ll discuss loan-to-value ratios a little later, but regardless of how much you are borrowing, you will need to stump up some form of deposit and cover processing costs. If you haven’t got the funds, the chances of you finding an agreeable mortgage are slim to none.
4) Scour the loan market – Search for a mortgage provider that is renowned for working with temporary residents. Certain lenders are rigid in their stance on lending to temporary residents, and their rates sometimes reflect this. However, some banks offer special deals for 457 visa holders, so it’s certainly worth shopping around.
5) Make your application – Once you’re happy that you’ve found the best deal, you can begin the application process. It doesn’t matter where in the world you are applying for a mortgage, you need to be thorough when providing personal information. This can be the difference between an approval and a rejection.
6) Make an offer – By this stage, your mortgage provider will have given you a clear idea of how much money you are entitled to borrow. Once you have this confirmation, you’ll be able to make bids on properties that you fancy.
7) Get a survey – Before you finalise your loan, you should pay an expert to survey your chosen property. This will uncover any nasty surprises that might make you think twice about your purchase. Minor things such as a few creaking floorboards or a dripping tap you can live with, but if the house has major structural faults or a pest infestation, you may wish to reassess.
8) Fulfil your legal obligations – You’ll need to work with a conveyancer. Sadly, there’s no avoiding it. Buying a house is a major commitment and as such you can expect plenty of legal I’s to dot and t’s to cross.
9) Settle up – Your solicitor should take care of when you’ll be able to receive the keys to your house, also ensuring that the funds from your mortgage provider are ready to hand over to the seller.
10) Live happily ever after – You’re in! Enjoy your new Australian abode. Maybe it’s time to become a full-time Aussie now?
Your questions answered
If you follow the basic steps outlined above, you won’t go far wrong. That said, there are plenty of other things that temporary Australia residents need to know when applying for a mortgage.
• What’s the maximum loan value ratio I can expect?
The default answer to this is 80%, but don’t listen to those who tell you that this is the best you can hope for as a 457 visa holder. Depending on your circumstances, you can get a loan for anything up to 95% of the value of your new home.
You don’t even have to be married or have direct relatives living Down Under. As long as you can pay for Lender’s Mortgage Insurance, you’ll be fine. This essentially covers the lender if you are suddenly unable to meet the terms of your mortgage.
• Will I get a worse rate than Australian citizens?
This depends where you get your mortgage from. While some lenders are wary about sanctioning loans for temporary residents, there are plenty that tailor packages specifically for this market. You might even secure a rate that is lower than the national cash rate and better than most Aussies can find.
• Does my mortgage become null and void if I lose my job?
In short, no. While losing your sponsorship from your employer is obviously a huge blow, this doesn’t automatically mean you’ll be shipped out of the country. If you can’t meet your repayments and end up defaulting on your loan, then you will eventually be repossessed, but that’s the case for all mortgage customers the world over. If you can find a new job in a quick enough time, you’ll be fine.
• Will buying my own property help my chances of securing permanent residency?
While being able to demonstrate that you are able to borrow money responsibly won’t do you any harm, the Department of Immigration and Citizenship ultimately doesn’t take property ownership into consideration when assessing your permanent residency application.
• What kind of lump sum do I need for my deposit?
This very much depends on the value of the property you intend to buy. However, you must also ensure you have set money aside for any stamp duty contributions and other fees that you’ll incur. This is where a lot of mortgage applicants come unstuck.
• Will I get any help from the government?
Initiatives like the First Home Owners Grant are intended for Australian citizens, so you won’t be able to apply for these. However, these become available to temporary residents if they are purchasing their home alongside their Australian partner.
What’s the property market looking like heading into 2015?
Now you’re fully clued up on the process of applying for a mortgage as a temporary resident of Australia, it’s worth giving you the lo-down on how the country’s property market is shaping up heading into 2015.
There’s been a lot of talk about Australia being one of the most unaffordable places to live in the world, but much of this is misguided. Assessing the housing market as one single entity can be counterproductive, as things can vary drastically depending on the region you are planning to live in. There are numerous factors that contribute to price fluctuations, including base rate changes, economic variables, developments in the banking sector and, perhaps most importantly, buyer demand.
Increasing supply to meet demand
As the supply of properties increases, houses will inevitably become more affordable.
Melbourne and Sydney are renowned for being more expensive than other parts of the country, which is mainly due to their popularity and the fact that there are only so many dwellings to go around.
However, Western Australia appears to be catching up. This part of the country is home to many ‘FIFI’ (fly in, fly out) workers who often earn substantial amounts of money working in the mines. With so much wealth in the region, cities such as Perth are starting to see huge levels of regeneration, making them even more desirable places to live.
The good news is that construction companies are pulling out all the stops to deliver enough houses to satisfy demand. This is reflected in a new report published by the Housing Industry Association in December 2014, which shows Western Australia has the healthiest market in terms of residential house building activity, followed by the Northern Territory, New South Wales, Victoria and South Australia. There has also been a marked improvement in Queensland, so all in all it appears that the country’s house building sector is in decent shape.
HIA economist Geordan Murray commented: “Western Australia has once again topped the rankings, remaining the strongest residential building market in the country by a healthy margin, ahead of the Northern Territory and New South Wales. There is daylight between the three strongest states and the rest of the pack.”
Is now the right time to buy? 66 per cent of Aussies seem to think so
For many people, it’s impossible to pick and choose when you get on the property ladder – you have to grab opportunities as and when they present themselves.
While house prices are generally stubbornly high nationwide and fears of “market corrections” continue to linger, the low base rate and improving housing pipeline mean this is a great time for non-permanent residents to lay some roots in their adopted country. Research published by RP Data in November 2014 showed that although 68 per cent of Aussies think a significant property price correction is possible, two-thirds of respondents still believe that now is a good time to purchase a house Down Under.
When all’s said and done, if you are currently in possession of a 457 visa and you have the necessary funds to purchase your own Australian home, don’t let anything put you off!
To discuss your accommodation options in more detail, please don’t hesitate to get in touch with one of True Blue’s expert migration agents.