Home Loans for Temporary Residents

Demand for Australian property comes from all over the world. In the twelve months to July 2023, net overseas migration added 518,000 people to the Australian population according to the ABS. Meanwhile the Australian Taxation Office (ATO) recorded 4,228 residential property purchases from July ‘21 - June ‘22 by foreigners, with a total value of $3.9 billion.

While there are those who feel the Government still needs to be stricter, there are already restrictions around buying property as a non resident. Anyone who applies for a home loan in Australia will need to provide their residency status. If you aren’t a permanent resident, you will generally need to meet additional criteria from both lenders and the Government.

Non-resident home loans in Australia

If it were just up to lenders, mortgage criteria would probably be more indiscriminate, but a set of laws also apply to non residents who want to buy Australian property. The Foreign Investment Review Board (FIRB) is in place to “ensure foreign investments are in the national interest,” and governs residential real estate. If you live in another country but want to invest in Australian property, you will need FIRB approval unless an exemption applies.

Exemptions

Per the Treasury Department, there are certain classes of people living overseas who may be exempt from needing approval to buy residential land:

• Australian citizens or permanent residents. You are taken to be “ordinarily resident” and not requiring FIRB approval if you do not live in Australia, but before you left there were no limits on how long you could have stayed. However, some Australian citizens who live overseas may not be classed as ordinarily resident. This is assessed on a case by case basis.

• New Zealand citizens who hold or are eligible for a special class visa. This generally means a 444 visa which allows eligible New Zealand citizens to visit, work and study in Australia.

FIRB criteria

The general principal is that foreign investment needs to benefit Australia. For example, if you’re an overseas investor looking to buy vacant land to build a house on, you will be contributing to the housing supply so are likely to be approved. For the same reason, the purchase of new dwellings is also often approved with minimal conditions.

It can be more complicated to show that the purchase of an existing dwelling genuinely benefits Australia. You might need to plan to redevelop the property in a way that increases the housing stock: if you plan to replace a house with two townhouses for example, you have a good chance of being successful.

There are other rules as well that the FIRB will take into account. For example, developers are often restricted to selling no more than 50% of the dwellings in a new build to foreign investors.

Applications are reviewed on a case by case basis. If you’re interested, you’ll need to submit an application through the ATO. The following fees may apply based on the value and type of property, correct as of 9 April 2024. A vacancy fee is charged if the property is not tenanted or not “genuinely available for rent” for more than half of the year. Until 31 July 2024, the vacancy fee is the same as the foreign application investment fee, but from 1 August it will be doubled.

Property Value	Fee for New/Near New Dwellings or Vacant Land	Vacancy fee (from 1 August 2024)	Fee for Established Dwellings	Vacancy fee (from 1 August 2024)
Less than $75,000	$4,200	$8,400	$12,600	$25,200
$1 million or less	$14,100	$28,200	$42,300	$84,600
$2 million or less	$28,200	$56,400	$84,600	$169,200
$3 million or less	$56,400	$112,800	$169,200	$338,400
$4 million or less	$84,600	$169,200	$253,800	$507,600
$5 million or less	$112,800	$225,600	$338,400	$676,800
More than $5 million	Refer to the Foreign Investment website	Refer to the Foreign Investment website	Refer to the Foreign Investment website	Refer to the Foreign Investment website

Some states also levy additional charges for foreign investors like a surcharge on stamp duty or additional land tax obligations.

Exemption certificate

The ATO allow some foreign investors to purchase an exemption certificate which allows them to invest in a certain type of property up to a certain value. This means the borrower does not need to make an FIRB application every time they put an offer on a property, which would be expensive and time consuming. Exemption certificates are generally judged by the same criteria as normal FIRB approval, and are valid for twelve months.

Exemption certificates will specify:

• A limit on property value

• The state or territory where the property may be purchased

• The type of property that can be purchased

The same fees as detailed above apply.

Home loans for overseas investors

Many Australian banks have strict requirements about lending to foreign nationals. Commonwealth Bank for example require a valid visa and the borrower to physically attend a branch in Australia. Enlisting the help of a mortgage broker that specialises in these transactions could be one way to quickly identify the lenders that might be interested in this kind of business.

Some international banks that operate in Australia offer investment home loans that can be used to buy Australian property from overseas, including:

• HSBC

• CitiBank

• Bank of China

Foreign borrowers may encounter stricter Loan to Value Ratio (LVR) requirements as well as higher interest rates than domestic borrowers.

Home loans for temporary residents in Australia

Temporary residents looking to buy property are considered foreign investors under the Foreign Acquisitions and Takeovers Act (1975). As we know, this generally means FIRB approval is required, but there are allowances made for non citizens who are nevertheless residing in Australia.

Temporary visa home loans

While temporary residents generally still need FIRB approval, they are usually allowed to purchase an established dwelling under the following conditions:

• The property will be their principal place of residence in Australia

• The property was vacant at settlement

• No part of the property is rented out

• The property must be sold within three months from when it ceases to be their principal place of residence

Temporary residents can use an exemption certificate to purchase an established dwelling to live in while residing in Australia. This works in the same way as the above exemptions for foreign investors and can allow them to circumvent FIRB approval.

Per the FIRB, there are two ways for an individual to qualify as a temporary resident:

• You hold a temporary visa that permits you to stay in Australia longer than twelve months.

• You are living in Australia, have submitted an application for a permanent visa and hold a bridging visa (A, B or C) that allows you to remain in the country until the permanent application is finalised.

If you become an Australian citizen or permanent resident, these rules no longer apply and there will be no restrictions on you to purchase or own Aussie property.

820/801 visa home loans

An 820 visa allows the de facto partner of an Australian citizen, permanent resident or eligible New Zealand citizen to live with their partner in Australia temporarily. Once you hold an 820 visa, you can apply for an 801 visa which makes this arrangement permanent.

If you hold an 801 visa, you are considered a permanent resident so should have no problems applying for a home loan. Whilst only holding an 820 though, you will likely need FIRB approval to have your name on a home loan. Your partner will likely still be able to apply, but you will not be able to use your income as part of your application until your residency becomes permanent.

Home loans for Australian expats

As we mentioned above, Australian citizens who do not live in the country are often considered “ordinarily resident” by the FIRB and do not need approval to buy property. If you’re in this boat, you still might find it more challenging to be approved for a home loan than residents. Lenders may charge higher interest rates to property investors who live outside of the country, and often also have higher LVR requirements.

The following are some of the providers that may lend to Australian citizens living overseas:

• CommBank

• ANZ

• loans.com.au

• HSBC

Picture by Tierra Mallorca on Unsplash