Are you are a foreigner wanting to live and work in Australia as a temporary resident? One of the first things you will need to secure is your residence. But can you buy a property in Australia using your temporary visa? Will Australian lenders accept your visa type when the time comes for you to apply for a home loan?
In this article, we have put together everything you need to know about home loans for temporary residents.
Do you need approval to buy a residential property in Australia?
You must definitely seek prior approval for all acquisitions. If you are a temporary resident holding a valid visa that allows you to stay in Australia for more than 12 months, you will be permitted to buy one established dwelling as your residence in Australia, any number of new dwellings or vacant land (subject to development and other conditions).
You are not permitted to buy multiple established dwellings, except for redevelopment purpose (subject to development and other conditions).
What if you cannot afford to buy a property and your parents are not temporary residents?
If you are a temporary resident but your parents are not, can they purchase a property (in their own names) for you to live in? Can they purchase a property jointly with you? The answer is yes, but they will need prior approval to do any of the above. Approval will be granted according to the relevant eligibility criteria – ie, as non-residents, they are ineligible to buy an established (second-hand) dwelling.
Please note that if your parents will be loan guarantors but will not acquire any interest in the property (ie, they will repay the loan if you are unable to make the repayments, but they have no rights to the property), they do not require approval.
How much can temporary residents borrow?
Like being a permanent resident, your borrowing power depends on the type of visa you have, your occupation and the strength of your overall financial situation. But here is the general rule:
- 80% of the property value: If you are working under the short-term skilled occupation list or STSOL (one to two years)
- 90% of the property value: If you have a strong income and stable employment, are working under medium and long-term strategic skills list or MLTSSL (four years)
- 95% of the property value: If you are married or in a de facto relationship with an Australian citizen or permanent resident – regardless of your visa status
As for visa expiry, your visa must have over 12 months remaining – but there are some exceptions to this.
Which temporary residents are qualified for a loan?
The Australian government and the Foreign Investment Review Board (FIRB) do not restrict particular visa types from borrowing money, but Australian lenders may not approve loans for some temporary residents.
Australian lenders tend to consider these visa holders as "Australian citizens", who may be entitled to borrow up to 95% of the property value:
- Interdependency visa
- Spouse/spousal/partner visa
Australian lenders tend to consider the following visa holders as "non-residents", who may only be entitled to borrow 80% to 90% of the property value:
- Temporary Business (Long Stay) – Standard Business Sponsorship and Temporary Skill Shortage (TSS) visa: up to 90% of the property value as a special exception to normal bank criteria (conditions apply)
- Temporary Work (Long Stay Activity) visa
- Temporary Work (International Relations) visa
- Investor Retirement visa
- Working Holiday Visa
- Business Owner (Provisional) Visa
- State or Territory Sponsored Business Owner (Provisional) Visa
- Senior Executive (Provisional) Visa
- State or Territory Sponsored Senior Executive (Provisional) Visa
- Investor (Provisional) Visa
- State or Territory Sponsored Investor (Provisional) Visa
- Skilled Regional (Provisional) visa
- Business Visitors Visa
- Visiting Academics Visa
- Sport Visa
- Entertainment Visa
- Skilled Exchange Visa
- Film, Media, Actors and Support Staff, Photographers and Journalists Visa
- Emergency Visas
- New Zealand Citizen’s Family Members Visa
- Religious Worker Visa
- Skilled – Regional Sponsored visa
- Special Program Visa
- Prospective Marriage visa
- Medical Treatment Visa
- Medical Practitioner Visa: up to 90% of the property value; may qualify for significantly reduced interest rates and waived LMI
- Sponsored Family Visitors Visa
- Special Category Visa
- Contributory Temporary Parent Visa
- Contributory Temporary Aged Parent Visa
- Student Visa: up to 80% of the property value if you are working (if not, then your parents may be able to purchase the house for you)
- Temporary Graduate Visa
- Student Guardian Visa
- Business Innovation and Investment (Provisional) visa
- Holiday and Visiting Visas
- Short Validity Business ETA Visas
- Long Validity Business ETA Visas
- Bridging Visas
Are you eligible for first home benefits?
Unfortunately, as a temporary resident, you can’t apply for the first home owners grant (FHOG) and other government benefits such as welfare and Medicare. The exception is if you are buying jointly with an Australian citizen or permanent resident.
Can you get the same interest rates as an Australian citizen?
Since you are living and working on Australia, you would not necessarily have to pay a higher interest rate just because you are on a temporary visa. In fact, you may qualify for significant home loan fee discounts and special interest rates that are way below the bank standard variable (BSV) rate. As long as you are in a good financial position, with a stable job and a good deposit, you are potentially eligible for the same discounts as an Australian citizen. If you are applying for a smaller amount, then you can still qualify for a competitive basic mortgage.
Can you use foreign income?
It is not uncommon for temporary Australian residents to have income from a business, an investment property or a pension outside of Australia. They often use this income to help them pay their mortgage in Australia.
However, not all lenders will accept foreign income in their assessment. Others will only accept your income if you are an Australian resident for tax purposes and have declared your foreign income on your Australian tax returns.
Nevertheless, some lenders have a simpler income verification process and can accept foreign tax returns, pension statements or rental income receipts as evidence of income. They will usually use 80% of this income in their assessment to allow for exchange rate fluctuations.
Should you buy now or become a permanent resident first?
If you are currently on a bridging visa and will soon be receiving your permanent resident (PR) visa, it would be better for you to wait. However, if you can’t wait and you are planning to buy with an Australian citizen or PR, you may consider buying a house in their name. But if you choose to wait, here are the benefits you can get:
- You will qualify with more lenders and be eligible to borrow more at lower interest rates.
- If you get a PR visa or marry someone who has it, you can avoid the cost and hassle of getting FIRB approval , which is a requirement for temporary residents.
- You can avoid the foreigner stamp duty surcharge, which is a requirement for temporary residents planning to buy a residential property in NSW, ACT, VIC, SA, WA and QLD. This surcharge varies from state to state, but ranges from three to seven percent of the land value.
How does it work when you buy with an Australian partner?
Legally, both you and your Australian partner can have your names on the mortgage but only your partner can be on the property title. This means that, for intents and purposes, the property is solely owned by an Australian – who is exempt from the surcharge and FIRB approval. Of course, the benefit of keeping two names is that both incomes can be used when assessing your borrowing power, which means you have a better chance of being able to borrow the amount you need.
Lenders generally prefer that the Australian citizen (or permanent resident) is the main income earner. This is to your advantage because they will see you as a lower risk and with stronger ties to Australia, thereby increasing your chance to be approved for your loan.
What if your visa is about to expire?
If you acquired an established property after 24 April 2010, you are required to sell this property when you leave Australia. If you are unable to sell the property within three months of leaving, you should contact the FIRB to discuss your circumstances. A desire to wait until house prices improve is not considered a sufficient reason to justify retaining a property.
Home loans for temporary residents are available if you choose the right lender. If you present a strong case, you can even qualify for significantly reduced interest rates and other home discounts. And, although lending policies for temporary residents are a bit complicated, you can increase your chances of getting approved for a home loan by having the following: at least a year remaining on your visa, most of your savings already in Australia, and stable employment in a sought-after profession.