Home Loans for Foreigners in Australia

Created: Dec 27, 2023 | Updated: Jan 1, 2024

Owning a home in a foreign country can be an exciting idea and Australia is one of the top choices for many people. If you are dreaming of calling the vibrant cities or serene landscapes of Australia home or you just wish to own property there, there’s good news for you. Down Under, foreigners have the choice to explore the possibility of getting a home loan and owning property. So, in today’s blog post, we will look into the details of getting home loans for foreigners in Australia. 

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What is an Australian Non-Resident Home Loan?

This is a loan given to non-residents of Australia who are looking to buy Australian property. According to The Foreign Investment Review Board (FIRB), you can have access to non-resident home loans in Australia if you are:

• An Australian citizen living overseas (Expats).
• A New Zealand citizen.
• A foreign national living overseas.
• A foreign national living in Australia on a temporary, working, spouse or student visa.

You can get these loans as long as you understand the property market clearly and abide by all the rules set by the review board. The situation for getting a home loan will differ depending on your situation. An Australian citizen living abroad or a New Zealand citizen will have different rates or rules from a foreign national with a temporary visa. 
 

Types of Home Loans in Australia
 

1. Variable Rate Home Loans: A Variable Rate Home Loan is a type of home loan where the interest rate can change over time in response to fluctuations in the financial market. Borrowers may benefit from rate decreases but are exposed to potential increases.

2. Fixed Rate Home Loans: This is a type of home loan where the interest rate remains constant or "fixed" for a specified period, typically ranging from one to five years. During this predetermined period, borrowers are protected from fluctuations in interest rates, providing financial predictability and stability.

3. Split-rate Home Loans: A split-rate Home Loan is a mortgage that combines features of both variable and fixed-rate home loans. It allows borrowers to allocate a portion of the loan to a fixed rate and the rest to a variable rate.

4. Interest-Only Home Loans: This is a home loan arrangement where borrowers are only required to pay the interest on the loan for a specified period, typically ranging from one to five years. During this initial period, borrowers are not obligated to make principal repayments.

5. Low Doc Home Loan: A Low Doc Home Loan, short for "low documentation", is a type of home loan designed for individuals who may have difficulty providing the standard documentation required for a traditional mortgage. This type of loan is particularly suitable for self-employed borrowers or those with non-traditional income sources.

6. Line of Credit Home Loan: A Line of Credit Home Loan is a loan that provides homeowners with a flexible and revolving credit facility secured against the equity in their property.

7. Construction Home Loan: A Construction Home Loan, also known as a Construction Mortgage, is a type of loan specifically designed to finance the construction of a new home. This loan differs from traditional mortgages, as the funds are not provided as a lump sum upfront. Instead, the disbursement of funds is linked to the various stages of the construction process.

8. Reverse Mortgage: A reverse mortgage is a unique type of home loan designed for homeowners, typically seniors, who want to convert a portion of their home equity into cash without selling their property. Repayment occurs when the property is sold or the homeowner moves out.

 

The Main Types of Lenders for Home Loans in Australia

There are four main types of lenders you will encounter while seeking a loan in Australia. They are:

• Bank Lenders: These are the most familiar institutions. They are traditional financial institutions that have obtained a banking license and offer a comprehensive range of financial services, including accepting deposits, providing loans, and facilitating various banking transactions.
   
• Mutuals (member-owned) Lenders: Mutuals, also known as member-owned lenders, are financial institutions that operate on a cooperative basis. Unlike traditional banks that are owned by shareholders seeking profits, mutuals are owned by their members, who are also their customers. Members typically include individuals with accounts or loans with the institution.
   
• Non-bank Lenders: Non-bank lenders are financial institutions that provide lending services but do not hold a full banking license. Unlike traditional banks, non-bank lenders do not offer a complete range of banking services such as savings accounts or checking accounts. Instead, they focus primarily on lending activities.
   
• Neo-bank Lenders: Neo banks, also known as digital banks or challenger banks, are financial institutions that operate exclusively online or through digital platforms, without physical branches. Unlike traditional banks, neo-banks use technology to deliver banking services more efficiently, often with a focus on user-friendly interfaces and innovative features.
  
  
   

How to Get a Non-Resident Home Loan in Australia 
 

Getting a Non-Resident Home Loan as an Australian Citizen Living Abroad

If you’re an Australian citizen living in another country, getting a home loan should be relatively easy.  You should have no legal complications and will not have to worry about eligibility while applying for your loan. You will also not be required to return to Australia to sign your documentation because you are allowed to use an e-signature to sign most loan documents. All you need is your Australian citizenship and your Australian bank account for the repayments. 

Although some lenders charge a slightly higher interest rate for expats, the rate you may be offered should be similar enough to the interest rate that would be offered if you were living in Australia.

Because you aren’t a foreign national or non-resident by legal definition, you will not need to apply to FIRB. Also, certain banks will permit you to make some of your loan repayments in the currency you earn, especially currencies such as the United States Dollar, the British Pound or the European Euro which allows you to avoid paying any currency conversion fees.

 

Getting a Non-Resident Home Loan as a New Zealand Citizen

If you are a New Zealand citizen who has been to Australia at least once, you do not need to get FIRB approval either, before applying for a home loan. When you arrive in Australia, you will receive a Subclass 444 visa which grants you permanent resident status in Australia and allows you to buy properties with the same rights as Australian citizens. 

This rule is different if you are a permanent resident of New Zealand in which case, you will need FIRB approval. 
 

Steps to Getting a Home Loan as a New Zealand Citizen
 

1. Get a job in Australia to provide payslips for your approval.
2. Calculate your borrowing power and estimate a budget for your property.
3. Find a property you like and is within your budget.
4. Find a lender who is offering the best deal for you.
5. Put the needed documents together and submit them to your lender.
6. Make an offer on your property of choice and pay for it when you and the seller agree.  
   
    

 

Getting a Home Loan as a Foreigner in Australia

Foreigners can legally buy property in Australia if they get FIRB approval. If you are in this category, it is necessary to check if you qualify for a home loan. You need to get  FIRB approval for a property once your offer has been accepted on the property. FIRB charges fees for approvals based on the value of the property but will give you special treatment if the property you are buying is new or supports economic growth in the area. 
 

How to Get a Home Loan as a Foreigner in Australia
 

1. Visit FIRB and confirm that you qualify.
    
2. Choose a lender that suits your needs. Consider how much you can borrow, interest rates and repayment schedules, then compare with other lenders. 
    
3. Put the essential documents (more on these documents in the next section) together and submit them to the bank.
    
4. Translate any foreign documents that are not in English with the help of a NAATI-certified translation service.
    
5. Submit your documents to your bank and get a pre-approval of your home loan.
    
6. Find a property you can afford and agree on a price with the seller.
    
7. Pay a deposit and secure the property.
    
8. Apply to FIRB to approve the purchase of your property.
    
9. Complete your payments and take ownership of your property.
    

Essential Documentation for a Home Loan in Australia

a) Primary Documents (provide at least one of the following):

• Foreign Passport or Australian Passport
• Australian Driver’s license or Learner’s permit
• Australian Residence Permit

b) Secondary Documents (provide at least one of the following):

• Australian birth certificate
• Australian citizenship certificate
• Medicare card
• ATO assessment notice (less than 12 months old)

c) Income Documents (provide at least one of the following):

• Bank statements showing three months’ salary credits 
• Proof of Income
• Your employment contract or letter showing details of your employment and salary
• Tax return and ATO Notice of Assessment less than 18 months old
• A Centrelink letter outlining your payments

d) Documentation of Assets and Liabilities like:

• Shares
• Vehicles
• Loans
• Credit Card limits

e) Breakdown of living expenses like 

• Food
• Transportation
• Electricity bills
• Water bills
• Recreation and entertainment expenses
• Insurance
• Education Expenses 
• Internet bills, etc.

f) Proof of FIRB Qualification
 

To translate foreign documents to English, you should consult a professional translator that can deliver accurate NAATI-certified translations quickly and at an affordable rate like Translayte. Click the link and place an order to get started.

 

How Much Can You Borrow When Taking a Home Loan?

When you want to get a non-resident home loan, your lender will consider a few things when calculating your borrowing power. These include:

• If you work in a country that does not charge income tax. 
• If you have any existing foreign loans. 
• Your income
• Your citizenship status

In addition, it is necessary to consider and decide how much you can afford before requesting a loan. Sometimes, your lender could be working against your best interest. If you are deemed a qualified borrower, your lender could approve you for the maximum amount they believe you can afford which just may be too generous for you at the time.

 

Stamp Duty Costs

Stamp duty in Australia is a state or territory-based tax imposed on certain transactions, including property purchases. The amount of stamp duty varies across states and territories, and it is calculated as a percentage of the property's purchase price. The rates and exemptions can change, so it's important to check the specific regulations in your location. 

To calculate your stamp duty, you can easily go online and find an Australian stamp duty calculator that will allow you to see the differences in stamp duty fees in different states in Australia.

Stamp duty fees can vary widely and there is no uniformity in terms and conditions nationally. 

For example, the stamp duty on a $500,000 property without any concessions across different Australian states is: 

• New South Wales (NSW) – $17,990
• Victoria – $25,070
• Queensland – $15,925
• South Australia – $21,330
• Western Australia – $17,765
• Tasmania – $18,247.50
• Australian Capital Territory – $13,460
• The Northern Territory – $23,928.60
   

Stamp duty varies based on property value and location. NSW calculates it with a mix of fixed amounts and percentages. Victoria uses a sliding scale, with higher percentages for more expensive properties. Stamp duty is a significant revenue source for regional governments, particularly from high-end property transactions.

 

FAQs
 

How Much Do Temporary Residents Need to pay for Stamp Duty in Australia?

An additional stamp duty of up to 8% is applied for foreign buyers acquiring property in Victoria and New South Wales, while in Queensland, South Australia and Western Australia, it is 7%. This is in addition to the standard stamp duty. There is currently no additional stamp duty surcharge for foreigners in the Northern Territory and the ACT. 
 

Will the Rental Income From an Investment Property in Australia be Subject to Taxes After a Non-resident Investor Buys it?

Yes, rental income from an investment property in Australia is generally subject to taxation, regardless of whether the investor is a resident or non-resident for tax purposes.

 

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