Buy Property in Australia from Overseas Series Part 7: Your Mortgage

buy property from overseas in Australia - mortgage

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Welcome to part 7 of our Buy Property in Australia from Overseas Series. This week will look at an important document — your mortgage. (To start at the beginning of the series, read Part 1: Real Estate Industry Professionals Foreign Investors Should Deal With)

When purchasing foreign real estate, it’s important to know which types of loans are available to you. Since the Australian government closely regulates the conveyance of real estate between parties, the types of available loans depend largely on your resident status. When acting as a foreign investor you are either a former citizen who still holds residency status, a temporary resident, a permanent resident, a foreign citizen married to someone with permanent residency, or a foreigner with no residency status. Your residency status determines what a lending institution will let you borrow.

Typical Loan Values

When looking to mortgage your property, you can expect to be allowed to mortgage up to 80% of the property value if you are a foreigner who lives and works abroad. The actual amounts a bank will loan you depend on a number of factors, so consider 80% to be the high end of the loan amount. If you are a citizen, married to a citizen, or have a temporary visa and are living and working in Australia, you can expect to borrow up to 90-95% of the property value. Most lenders will allow you the typical 15 to 30 year mortgages no matter your residency status.

Loan Options and Grants

Some overseas investors take advantage of the foreign currency loan. This is a great option if you’re living and working outside of Australia and would like to make your payments in the currency you currently receive from your employer. The interest rate is not hiked up to take advantage of this loan, as most lending institutions provide the same interest rates to citizens as they do foreign investors.

Foreign currency loans are available in U.S. dollars, Hong Kong dollars, Singapore dollars, New Zealand dollars, and Euros. Your loan will be worked out so that your repayment is matched to your current currency. This way you are able to repay your loan with familiar currency, which helps you to better understand the terms and conditions of your loan.

The first time home owner’s grant is awarded to people purchasing their first home in Australia. Not everyone qualifies, and you do need to be a permanent resident or married to a permanent resident in order to get the loan. You should speak with your broker about this grant, as it actually repays you a certain amount when you take out a loan.

Applying for a Mortgage

Even if you’ve pre-qualified for a certain amount, you will still need to send in paperwork and documents once you apply for a loan. Australia lenders understand that foreign investors will probably not have any credit history within Australia. Borrowers are not penalised for a lack of credit history. Instead, you will be expected to prove that you have a stable income and will not be a risk to the bank. Expect to show payslips, tax forms, employer reference letters, and possibly a letter from your accountant. If you can prove to the lending institution that you’re able to pay back the loan without default, you could have success getting an Australian mortgage.

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