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Understanding non-resident home loans

Understanding non-resident home loans

The booming economy, high-quality lifestyle, and choice of locations make investing in Australian property lucrative. If you want to invest in Australian property, you’ll need to understand the rules and regulations governing non-resident borrowers. You can check the Foreign Investment Review Board (FIRB). Before your application for a non-resident home loan is approved, the government authorities will evaluate it.

Requirements of non-resident home loans

For a non-resident home loan, Australia has different processes you need to know before buying a property. You can find all information about the rules applicable to non-resident borrowers on the FIRB website. It’s also vital that you understand the property market because every location has unique features, such as demographics, culture, etc., which will impact price and availability.

Some of the considerations you need to think about before applying include:

  • Some lenders may charge a higher interest rate for non-resident loans.
  • If your income is in a foreign currency, you must check if the lenders will accept this currency as repayments. Some common currencies that are accepted include USD, HKD, NZD, EURO, GBP, CAD, JPY, SGD, and CHF. 
  • Some lenders may apply restrictions if your income is in the currencies of countries like Saudi Arabia, South Korea, Indian, Taiwan, Thailand, UAE, etc.

You will also likely need at least a 10 per cent deposit along with an adequate amount of savings or other funds to cover upfront costs, such as mortgage set up fees, Lenders Mortgage Insurance (LMI), stamp duty, and legal fees. 

If you own another property in Australia, you can use any equity you’ve built up in it to put towards a deposit for the new home. Lenders may offer you a loan where no deposit is needed, if your parents own a property in Australia and are willing to act as guarantors for your loan.

How much can you borrow for a non-resident home loan?

Your borrowing power, or how much you’re able to borrow, depends on your situation and the lender. Generally, most property buyers in Australia can borrow up to 80 per cent of the properties value as a home loan. In some instances, you may be able to borrow up to 95 per cent of the property value. This will depend on the lender, your financial situation and your citizenship status or your visa’s current status.

If you’d like help to work out how much you may be able to borrow contact a mortgage broker who can offer expert assistance.

Features of non-resident home loans

Some lenders offer the same features to non-residents as they do to Australian borrowers. Generally, the features of non-resident home loans may include:

  • A minimum loan amount of $100,000, with no limit on the maximum amount as it’s based on your personal circumstances.
  • A maximum loan to value ratio (LVR) that depends on your situation.
  • A maximum loan term is 30 years.
  • Multiple loan types, including fixed or variable interest rates, construction loans, professional packages etc.
  • A maximum fixed interest period of up to 15 years.
  • A 100 per cent offset account.
  • Redraw facilities

As the loan features vary from one lender to another, it may help to consult a mortgage broker who can help you find the best loan suitable for your requirements.

How do lenders view non-resident property investors?

When it comes to non-resident home loans in Australia, different lending rules apply depending on the lender you apply with. As a general rule, lenders tend to take either of the following three views on non-resident applicants: 

  • They can decline applications outright as they perceive foreign borrowers as high-risk applicants. They also decline because their internal systems cannot process home loan applications received from borrowers who live outside the country.
  • They place certain lending restrictions on the loan amount or ask for additional documentation for Australian expat applicants, temporary Australian residents, or foreign nationals.
  • A few lenders actively assess home loan applications from non-resident borrowers and offer flexible terms to temporary residents who want to buy a property in Australia.

Borrowing for non-residents is slightly complicated. To help guide you through the process. you can work with an experienced broker. They understand the process and can assess your particular situation to procure the best deal for you.

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