Non-resident home loans

• Approximately one million Australians who live and work overseas but want to buy property in Australia as an investment or to live in once they return home
• Large numbers of expatriates who already have property in Australia and want to access equity on property, to refinance or consolidate your debts.
• Foreign nationals eager to buy property in Australia for children studying here, who may wish to apply for permanent residency at a later stage

Every year non-residents including Australian expats and foreign nationals express an interest in buying property in Australia.

Regardless of which category you belong to, it can be hard to find regular bank lenders to answer your call because they don’t have standard international borrower loans for non-residents and expatriates. If the following are the types of questions you ask yourself, you are not alone.

Can non-residents buy property in Australia?

Yes, you can. The types of non-residents who can buy property in Australia include:

• Australians living and working overseas (expatriates)
• Foreign nationals
  • New Zealand citizens
  • Foreign citizens living overseas
  • Foreign citizens in Australia on a working visa
  • Foreign citizens in Australia on a temporary visa
  • Foreign citizens living in Australia on a spouse visa
  • Foreign citizens living in Australia on a student visa

The process will be different for you than for a citizen or Australian permanent resident. There are also some differences between expatriates and foreign nationals, both of which are non-resident categories. New Zealanders may enjoy the benefit of better rates and terms as well as the numbers of lenders willing to work with them.

How is it different for a non-resident buying a home?

Different rules and regulations apply

• If you are a non-resident in Australia, different rules and regulations apply to you when you want to buy property, whether you are looking for a home loan, a second home or even investment property.
• If you’re a foreign national, before you can buy property you need to apply to the Foreign Investment Review Board ( FIRB) for approval. (This does not apply to Australian expats). FIRB is the agency responsible for channeling foreign investment in Australia.
• If that sounds complicated, it is. But not as complicated as it sounds. You can still get a home loan. But before your home loan application is approved for a non-resident home loan, it will be evaluated by Government authorities.

Finding a lender who will work with you

Most lenders cater to Australian citizens or permanent resident borrowers. If you ask your bank that you have been dealing with for years as a non-resident, the answer is likely to be "Thanks for asking, but no we don't do non-resident home loans or property loans". So you need to find an alternative.

What property can non-residents buy in Australia?

Again there are limits, and some can be exasperating. Here's what you can buy in Australia as a non-resident:

• A new home
• A home to live in if you are a temporary resident. However, you must sell the property before leaving Australia unless you become a citizen or a permanent resident.
• You may buy vacant land if you plan for construction to be completed within four years.
• If you’re a property developer, you can buy established dwellings on the condition that existing buildings be demolished and replaced with a greater number of properties.

Conditions, deposits, earned income

Once you find a lender, here's what else is likely to be different:

• Stricter conditions. You can expect stricter conditions for your loan when dealing with the few lenders who work with non-residents
• Larger deposits. Expect to be asked for a bigger deposit than the 20% minimum typically required of regular home loan applicants.
• Earned income in Australia may be another requirement. Verifying income and determining eligibility limits, borrowing power and capacity to repay will vary from lender to lender.

Typical terms for non-residents

Lenders may have two product types: Expat loans and Non-resident loans.

How much you may borrow depends on whether you are Australian or not, where you are living, and the type and terms of your visa.

The following terms are common to both types:

• Borrow up to $2.5 million for up to 25 years
• Competitive (if slightly higher) interest rates
• Maximum LVR may depend on your situation, going upto 95% LVR.
• Variable or fixed rate home loans
• Income verification: Lenders want to fully verify your income to consider your borrowing limits and ability to pay.
• Security type: Lenders will accept residential properties including single build construction and commercial properties as security for expat home loans.
• Additional repayments will be allowed.
• Non-residents can expect to pay higher application fees than expats.
• Construction home loans will be available
• Internet banking: Available
• Phone banking: Available, however may not work for international calls
• Availability of the following depending on your situation
  • Option to make repayments in principal and interest or interest only
  • Redraw
  • 100% offset

Expatriate loans

Expatriate home loans and investment property loans are for Australian citizens who are living or working abroad and seeking to buy property, to refinance an existing property to access equity or for debt consolidation.

• Loan purpose: Purchase, refinance and cash out may be available
• Interest rates: Would be higher than for regular home or investment loans, but lower than those on non-resident loans.
• Minimum loan: $100,000
• Maximum loan amounts:
  • $15 million upto 70% LVR
  • $2.5 million up to 75% LVR
  • $1.5 million up to 80% LVR
• Max LVR is 80% for expat loans.
• Loan term: Up to 30 years (the same as for all other Australians)
• Repayment: A choice of principal and interest or interest-only repayments. The fixed rate period may vary from lender to lender.

Non-resident loans

Non-resident loans are for international borrowers who wish to invest in Australia with FIRB approval.

• Loan purpose: For purchasing and refinancing home or investment property. Cash out may not be available.
• Interest rate: Likely to be higher than on regular home loans and rates applicable to expatriate loans.
• Minimum loan: $100,000
• Maximum loan amounts:
  • Up to $15 million with up to 70% LVR
  • $2.5 million with up to 75% LVR
• Maximum LVR is likely to be 75% for non-residents. But may be higher with some lenders.
• Loan term: may be limited up to 25 years (in contrast to expat home loans and regular home loans which can go up to 30 years)
• Repayment type may be limited to principal and interest.

Considerations

Professional packages

When a bank offers to work with you, you may want to consider its professional packages. These are meant for people who plan to borrow more than $250,000, and make use of other loan facilities and private banking services in addition to rewards credit cards, investment property loans and transaction accounts. Your bank may have special packages for international clients to suit their specific needs.

Professional packages come with a single annual fee, which typically ranges from $300 to $750, depending on what is bundled in the package. Before choosing a professional package, you should compare the single annual fee against the total fees you would have to pay if you took out the products separately.

Consider working with a broker

A mortgage broker who is interested and experienced in finding non-resident home and property loans could help save you a lot of trouble.

Since brokers work with many lenders, they should be able to find you the best deals and most favourable conditions in international home loans. They will also likely help you with the application process and help you get the FIRB approval you need for buying a property in Australia.

Book a call with a mortgage broker near you.