Navigating a home loan when you are new to Australia
Mortgage brokers, loan pre-approval, fixed versus variable rate loans, stamp duty, conveyancing…..if you’re new to Australia, the language of home buying can seem mystifying. Here are some of the things you need to know to get yourself on the road to the great Australian dream. Keep in mind, however, that speaking with an expert is the best way to get the latest information.
Restrictions on foreign ownership
Before you get started, make sure you’re aware of the ownership restrictions for foreign buyers. If you’re not an Australian citizen or permanent resident, you may need permission from the Foreign Investment Review Board (FIRB) before you can purchase a property. In most cases, foreign non-residents are not permitted to buy established dwellings, and contract law means some people may not be able to buy at auction. Do your research and be prepared to make an application to the FIRB before you start your property search.
Count your costs
Next, think about your budget. Calculate how much you can borrow, what deposit you’ll need, what your monthly repayments will be, and how this fits with your current earnings and expenses.
If you need to borrow more than 20% of the total value of the property, most lenders will require you to take Lenders Mortgage Insurance (LMI). The amount varies, and it protects only the lender if you’re unable to repay the loan – not you.
There’s also stamp duty, which is a state tax on property purchases. The amount of stamp duty that is payable varies state by state, so be sure to use a stamp duty calculator to estimate what yours will be.
Secure your finance
It’s worth engaging a mortgage broker to help with your home loan administration, especially if you’re a foreign citizen with special requirements. The broker will act as an intermediary, researching the market and negotiating the loan on your behalf. Their services are generally free, as they’re paid a commission by the lender.
A mortgage broker can also help with deciding which type of loan is most suitable for you. The big choice is between a variable rate loan, where the interest rate fluctuates along with the market, and a fixed rate loan, where the rate is locked in for a set period of time.
Lenders will look at several factors when they assess your suitability for a loan, such as your ability to make the repayments, the stability of your employment and the quality of the investment. If you clear all the hurdles, you’ll be eligible for loan pre-approval.
Find your perfect property
Research property prices in your target neighbourhoods and be prepared to devote your Saturdays to ‘open for inspections’ (when potential buyers can visit properties for sale). There are many websites where you can search thousands of properties online and organise your inspections calendar, which can make your househunting a little easier.
Properties are sold either by private sale, where you’ll negotiate with an agent, or at auction, an open bidding war where you’ll be pitted against other buyers. Know your limit, have your pre-approval sorted, and keep your fingers crossed!
Conveyancing and settlement
Conveyancing is the legal process of transferring ownership of the property title from one person to another. It’s recommended you hire a conveyancer to deal with this complex documentation. This happens between the agreement and the settlement date, which will be set in the contract of sale. The settlement period is usually between 30 and 90 days, and can sometimes be negotiable.
Once you’ve got your head around the jargon and the steps you need to take, it’s just a matter of getting out there and looking for a property that suits your requirements. For more information about buying property in Australia, contact a mortgage broker today.
