Can a non-resident apply for a home loan in Australia?
The short answer is yes, a non-resident can apply for a home loan in Australia, but the process is complex. There are a number of rules and regulations non-permanent residents, foreign nationals moving to Australia, and foreign investors must navigate when purchasing property in Australia. Here are some important facts to know about non-resident home loans, also sometimes referred to as foreigner mortgages.
What are non-resident home loans?
Non-resident home loans are exactly what they sound like. They’re mortgages for those who are not citizens or permanent residents of Australia. While most lenders only provide home loans to Australian citizens and permanent residents, a select few also cater to non-residents. Although some lenders may provide these specialist loans, you’ll typically find that most are non-bank lenders, financial institutions that aren’t classified as authorised deposit-taking institutions (ADIs).
Non-resident home loans will generally have stricter approval criteria than regular ones, like requiring a higher deposit, as well as proof of funds and income in an acceptable currency. They’ll also usually come with higher interest rates, but you’ll otherwise have access to the usual loan types, such as a fixed rate, variable rate, or split rate loans. Interest only loans may also be available, but often come with maximum terms (e.g., five years).
What are the requirements for a non-resident home loan?
Before you can apply for a home loan as a non-resident, you must be granted permission to purchase property in Australia by the Foreign Investment Review Board (FIRB), a government body established to manage inbound foreign investment. You’re exempt from needing approval from the FIRB if you’re one of the following:
- An Australian citizen (including expats living overseas).
- A New Zealand citizen.
- An Australian permanent visa holder.
- A foreigner buying property as joint tenants with a spouse who belongs to one of the above groups.
Since the Australian Government has temporarily banned foreign purchases of established homes until 30 June 2029, non-residents are essentially limited to properties that are:
- New dwellings: Properties that haven’t been previously sold as a dwelling or occupied. If the developer sold the investment property, it must not have been occupied for more than 12 months.
- Vacant land: A property must be constructed within four years of the FIRB approval date.
An exception may apply if you’re planning a larger redevelopment which genuinely increases Australia's housing stock. The FIRB won’t grant approval to simply purchase an established home to knock down and build a new one. The development project must deliver at least 20 net additional homes, while meeting other government guidelines.
Should non-residents not adhere to the rules set out by the FIRB, they could face serious penalties such as fines or even criminal charges.
What is the application process for a non-resident home loan?
Outside of gaining permission from the FIRB, the application process for a non-resident home loan is generally much the same as for a regular home loan. While you can always search for a lender on your own, you may also wish to seek out a mortgage broker that specialises in non-resident home loans.
Like any loan application process, lenders will require several documents from you. The documents they’ll usually require include:
- Proof of identification, usually in the for of a passport and visa if applicable.
- Proof of income, such as payslips and bank statements.
- Proof of funds for your deposit.
- Details on any existing loans or debts, like other loans or credit cards.
- Details on your credit history (if you have one in Australia).
- Information on the property you wish to purchase.
How much of a deposit do I need for a non-resident home loan?
The deposit required will depend on the lender you choose, and the Loan-to-Value Ratio (LVR) they offer to non-residents. Generally speaking, non-resident home loans come with a low LVR, meaning, the amount you can borrow is typically less.
The lower the LVR is, the higher the loan deposit you’ll require. For example, if the LVR is 70%, you’ll need to provide 30% of the property’s value as the deposit.
Other non-resident home loan costs to consider
Additional costs outside of the the FIRB application fees and loan deposit include:
- Stamp duty costs, including any surcharges for being a foreign buyer.
- Property inspection fees, including building and pest inspections.
- Lenders mortgage insurance (LMI) in some cases.
- Legal fees for conveyancing.
- Land title and registration fees.
- Annual Vacancy Fee or “ghost tax”, which is a fee charged if you fail to occupy or lease out your property for at least six months per year.
Can I get a home loan in Australia as an Australian living overseas?
Most Australian lenders will provide home loans to Australian citizens living overseas. But unlike those for citizens and permanent residents living in Australia, there are usually extra requirements and conditions for Australian expats.
If you wish to take out a joint loan with a foreign spouse, however, you may encounter challenges. Lenders may not be willing to consider their income as part of the application, and you may have to purchase the property solely in your name. Even if you’re able to take out a joint loan, you’ll have to pay the Foreign Buyers Duty, which can potentially double your regular stamp duty costs.
Can a non-resident business owner buy property in Australia?
If you’re a business owner or are self-employed, it’s possible to be approved for a home loan in Australia, but it’s typically more difficult. This is due to the fact that your income will need to be verified by your mortgage broker and/or lender, and in some cases as a foreign business owner, this isn’t possible. If more than 25% of your income is derived from your business, you’ll be more than likely classified as self-employed.
Generally speaking, you’ll have a better chance at home loan approval if you can provide the necessary information in regards to what country you’re from, your income, the currency of said income, your living expenses, and your credit history, as well as supplying tax returns that are easy to read and understand.
