Buying Real Estate in Australia from overseas

The process of buying a house in Australia differs depending on which state you are buying in. Below is some general information, your mortgage broker or conveyancer can give you some additional help with the details.

Step 1 Getting your loan pre-approved

You can read more about this step below. In Australia you need to have your loan approved before you find a property. If it isn't then you risk losing the property because someone else can move in and buy it while you wait for your bank. Talk to a Non Resident Loan Mortgage Broker to see what options you have available. You can also find out more about financing your purchase by reading finance articles online.

Step 2 Find a property

You can use websites such as realestate.com.au or domain.com.au to help you look for a property. If you are looking for a luxury property (over $1m) you might want to get a buyers agent to do the work for you.

Step 3 Get your solicitor or conveyancer to give the thumbs up

Once you have found a property and negotiated a price your conveyancer should check the contract and organise a building and pest inspection. If you are buying a unit or flat they may also get a strata inspection. These checks are very important to make sure there are no problems with the property. While this is happening your bank will value the property and issue the formal loan approval.

Step 4 Sign the contract & give your deposit

If you are overseas you may want to give your solicitor a Power of Attorney so they can sign the contract for you. Once you have signed and given your deposit (usually 10% of the purchase price) then you are committed to buy. This step is known as exchanging contracts as the buyer and seller give each other a signed copy of the contract.

Step 5 Settlement

Settlement is the term given for when the property changes hands and usually occurs six weeks after you give your deposit. All that is left is to move in!

Australian Citizens can buy properties in Australia without too much trouble from the government. If you are an Australian Citizen living overseas then talk to a good conveyancer or solicitor to help you with the details.

New Zealand Citizens are considered to be permanent residents. Permanent Residents can buy real estate in Australia without government approval.

Most often, foreign investors are US Citizens, UK Citizens, Singapore Citizens, Mexican / Mexico Citizens or Dutch Citizens (Netherlands / Nederland). However investors from almost any country are accepted.

If you are on a temporary visa or if you are not living in Australia and you are not a Citizen then you will need to obtain approval from the Australian government before buying a property. You can refer to the Foreign Investment Review Board website to see if you are eligible. You MUST get approval before you buy, the government has very strict penalties for anyone who buys a property without FIRB approval. Read on to find out about how buying a new home or building a home can help you obtain FIRB approval.

If you are an Australian Citizen, New Zealand Citizen or Permanent Resident then you may be eligible for the governments $7,000 First Home Buyers Grant (FHOG).

Non residents and visa holders are ineligible. There may be additional subsidies depending on your state so check out the Government's first home buyer website for more details.

When buying a home you are going to need help from the following professionals.

Solicitor or Conveyancer

Also known as a settlement agent in Western Australia, your conveyancer handles the legal process of transferring the property into your name. Their job is to make sure the contract is fine and to organise searches / inspections to ensure there aren't any other hidden surprises. They liaise with your bank, the real estate agent and the vendor (person selling the property) to make the transaction as smooth as possible.

Mortgage Broker

Your Mortgage Broker will help you choose a lender and will deal with your bank on your behalf. In Australia Mortgage Brokers are paid by the lender for doing the work that the bank manager would normally do. Because of this Brokers do not usually charge any fees for residential loans. You can contact a specialist Foreign Investment Mortgage Broker if you need help with a non resident loan. You can also visit their page on the specialist loans available to non residents.

Buyers Agent

Most overseas buyers have a friend or relative in Australia that can help them buy. If you can't come to Australia and you don't have a friend that can help then you may want to hire a Buyers Agent. They will look for a property that meets your criteria then negotiate to get you the best price.

Home loans or Mortgage loans in Australia are vastly different to most loans overseas. You can contact a Mortgage Broker such as Home loan experts for help with any questions you have.

The Basics

• Most loans have a variable rate. These are flexible loans allowing you to pay off as much as you like and redraw any extra repayments you make.
  
• You can fix your rate for up to 15 years, but you lose the flexibility to make extra repayments.
  
• Loan terms are usually 30 years.
  
• Some lenders allow you to borrow in a foreign currency. This can help if your income is overseas and may be affected by exchange rate movements.
  

The rules for how much you can borrow and what rate you will pay change depending on your situation.

Australian Citizens living overseas

You can usually borrow up to 80% of the property value unless you are working for the Australian government abroad. Government staff can usually borrow up to 95% of the property value. If you are living in Australia you can borrow up to 106% of the property value.

Permanent residents & New Zealand Citizens

If you are living in Australia you can borrow up to 106% of the property value. If you are living in New Zealand you can borrow up to 95% of the property value, elsewhere you can usually borrow only 75% to 80% of the property value.

Non residents & temporary visas

Due to the higher risk to the bank they will usually limit you to borrowing only 75% or 80% of the property value.

Proving your income

Some lenders have "Low Doc" or "No Doc" loans which enable you to borrow money without proving your income. This is great for anyone with tax returns in a foreign language or a complex international trust structure.

Below is a list of the common charges you will pay when buying a property:

• Transfer Stamp duty. This is a state government tax based on the value of the property.
  
• Solicitors fees. Usually between $1,000 and $3,000.
  
• Bank fees. Depending on the lender somewhere between $0 to $1,000.
  
• Mortgage Stamp duty. This is a state government tax based on the amount you borrow.
  

As a general rule allow for 5% of the purchase price to be spent on other costs.

So if you are an American Citizen living in America and you are buying a property for $1 million then you would need around $250,000 to complete the purchase. The bank would give you around $800,000 and you would spend $50,000 on other costs, mostly stamp duty.

Building a home is another viable option. The Foreign Investment Review Board (FIRB) is more likely to grant you approval if you are buying or building a new home.

As well as traditional construction methods more people are turning to Manufactured Homes or Transportable Homes to build faster for much less. You will need a specialist to obtain a Manufactured Home loan.

It is not uncommon for non residents to buy "off the plan". This is the term used when someone buys a property that has not yet been built. You give your deposit up front but only pay for the rest & transfer the ownership once the property is complete. This is looked on favourably by the FIRB because it encourages investment in Australia.