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Mortgage Advisor & Director
Mortgages in Australia
Australia is the dream location for many Brits to emigrate. You might choose Oz to give your family more living space and more time outdoors in the sun, or you might choose to relocate for work reasons, taking advantage of higher wages.
Beware - Australia is a federal state. Each Australian state operates fairly independently, and you'll find that stamp duty and taxes vary widely from state to state.
Can anyone buy property in Australia?
Yes! Although if you choose to secure your finance from an Australian lender, it becomes more difficult for non residents. However, you have other options:
- Secure a mortgage from a UK lender that permits a loan secured on Australian property
- Remortgage your UK property to release equity, and use this cash to fund your purchase
If you choose to buy property in Australia using finance from a local lender, you will need a residency visa.
If you or your partner is an Australian citizen or has a residency visa, you will be able to buy property to live in together with a joint mortgage. You won’t be able to buy investment or buy-to-let property without approval.
What is FIRB approval?
The Foreign Investment Review Board (FIRB) is a government department that oversees foreign property purchases in Australia.
People with the following visas will need approval from the FIRB to buy property:
- Spouse visa (if applying as tenants in common)
- 457 work visa
- Temporary skill shortage (TSS) visa
- Student visa
You will likely be approved to buy property with these visas, but it must be an established dwelling that you plan to inhabit as your only home. If you leave Australia, you will be required to sell it.
You can buy investment property as long as it is a new development, including land to build on.
If you are on a spouse visa and applying as joint tenants, you do not need FIRB approval.
Investors
If you do not have a visa, and you are planning to acquire property as an investment, you will need approval from the FIRB. There are certain limitations on what kinds of property you can buy as a foreign investor. The property must be either a new build, or vacant land on which you will build new property. However, some developments will have exemption certificates - you do not need approval if the developer has secured this certification.
Acquiring property by other means
If you acquired the property via inheritance, or court order including divorce proceedings, you are also exempt from FIRB approval.
What kinds of mortgages are available in Australia?
Like in the UK, you’ll find both mortgages with fixed rates, and mortgages with variable rates. Fixed rates tend to be available for slightly longer terms than in the UK, up to 12 years.
There is a unique mortgage product available in Australia called a “professional package”, or “pro pack”. With these deals, the lender rolls a mortgage, credit card, and other financial products up into a single agreement. By taking out all of these services as one package, the lender offers discounts on the mortgage interest rates - similar to buying your gas and electricity from the same utility provider.
How much will I be able to borrow?
As a non-citizen, you will likely be able to borrow no more than 80% of the value of the property from an Australian lender, meaning you will need a 20% deposit as a minimum.
How much will it cost me to take out an Australian mortgage?
Costs and deductions will vary by state. You should budget for at least 5% of the value of the property for legal fees and other associated costs.
FIRB approval fees are determined by the value of the property, starting at around $5,000 (around £2,700). You will also be obliged to pay legal costs, stamp duty and inspection costs. Stamp duty is typically around 3-4% of the property value, though first time buyers will find reductions in some states.
Some states have implemented a stamp duty surcharge and land tax surcharge for foreign investors which can be pretty hefty - in New South Wales, the stamp duty surcharge is a whopping 8%.
What is the First Home Buyers Grant (FHOG)?
The FHOG is similar to the UK’s Help to Buy scheme. It’s not available for temporary residents or foreign citizens, but if your spouse or partner is a citizen or permanent resident, you may be eligible to apply for the grant.
The grant was introduced as a national scheme, but it’s funded and implemented at state level, so the benefits and eligibility requirements vary. In general, it must be your first home, you must inhabit the home yourself (i.e. you can’t let it out) and you must live there for at least six months. The grant is usually only available on newly built properties, or older properties that have been seriously renovated. There will be a cap on the value of eligible properties, and even if you are eligible, you won’t receive the grant until settlement (similar to “completion” in the UK). This means that you can’t rely on the grant to fund your deposit, which is paid earlier in the process.
Choosing an Adviser
Selecting a qualified and experienced mortgage adviser is of great importance. To choose a suitable adviser, evaluate their qualifications, experience, and reputation, and ensure they are regulated by the Financial Conduct Authority (FCA).
Read reviews from previous clients and make sure they provide a clear explanation of the products and services they offer, as well as the fees and charges associated with them.
