Owning property in Australia is the dream of every international student, a symbol of stability, security, and a lasting connection to this vibrant land. Many students often gravitate towards vibrant urban centres and student-friendly neighbourhoods such as Melbourne, Sydney, Brisbane, and Perth, cities that not only offer prestigious universities but ample job opportunities.
Due to visa restrictions, buying a home while studying presents a unique set of challenges and limitations in accessing favourable financing options. However, international students can purchase a house in Australia even if they don’t have full access to funds upfront by applying for a home loan.
In this blog, we will explore how, as international students, you can navigate the financial options, costs associated with purchasing property and fulfil your aspirations of property ownership in Australia.
Can an International Student Get a Home Loan in Australia?
In Australia, specific lenders may offer home loans to international students on specific visa types, allowing them to borrow up to 80% of the property’s purchase price if they meet the lender’s criteria. It’s important to note that eligibility requirements and loan terms vary among lenders. Therefore, it’s advisable to explore different options and seek guidance from mortgage brokers or financial institutions specialising in loans for international students.
What type of property can international students buy?
International students in Australia are generally restricted from buying existing residential properties due to government regulations. However, they can typically purchase new properties or vacant land with the intent to build, subject to certain conditions:
- New Properties: International students can buy newly built residential properties directly from developers or through the resale market if they have not been previously occupied.
- Vacant Land: Students can purchase vacant land with approval to build a new dwelling, provided they meet all local council and planning requirements.
International students are typically prohibited from buying existing residential properties, including established homes or apartments that have been previously lived in. These restrictions are in place to prioritise housing availability and affordability for Australian residents.
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Requirements for International Students to Buy a House in Australia
International students with temporary resident visas considering purchasing property in Australia must meet several specific requirements and adhere to various regulations. Here’s a comprehensive guide to the essential requirements:
Have Eligible Student Visas
To begin with, it’s essential to understand which visas allow for the purchase of property. International students on the following visas can buy property in Australia:
- Temporary Graduate Visa (subclass 485): This visa allows holder to live, study, and work in Australia temporarily after completing their studies, providing an opportunity to gain practical work experience.
- Student Visa (subclass 500): This visa permits international students to stay in Australia while they undertake full-time study in a registered course at an educational institution.
- Skilled-Recognised Graduate Visa (subclass 476): This visa is for recent engineering graduates of recognised institutions and allows the holder to live, work, or study in Australia for up to 18 months.
Get Foreign Investment Review Board (FIRB) Approval
One of the most critical steps for international students is obtaining approval first from the Foreign Investment Review Board (FIRB). This is mandatory for non-residents and temporary visa holders.
- Application Process: Before purchasing the property, you must apply for FIRB approval. The application can be submitted online through the FIRB website.
- Fees: The application incurs a fee, which varies depending on the property value.
- Criteria: FIRB approval is typically granted for new properties, vacant land, or established dwellings to be redeveloped. Purchasing an established dwelling solely as an investment property is generally not allowed.
Request Financing and Home Loans
Securing a home loan as an international student can be challenging, but it is possible with the proper preparation and understanding of lender requirements.
- Lender Policies: Not all banks or financial institutions offer home loans to international students. Research and find lenders that provide specific loan products for non-residents.
- Deposit Requirements: International students usually need a higher deposit than Australian citizens. Typically, a 20% deposit of the property value is required, with 5% for additional costs like stamp duty.
- Proof of Income: Students must demonstrate their ability to repay the loan. This includes providing evidence of income, such as part-time work, scholarships, or financial support from family.
- Interest Rates: Expect higher interest rates compared to those offered to Australian citizens or permanent residents.
Have a Good Credit History
A credit score is a numerical measure of a person’s creditworthiness. It assesses how likely someone is to repay their debts and meet their financial obligations. Lenders, such as banks and financial institutions, use credit ratings to determine the risk of lending money to a specific individual.
Why a Good Credit History Matters for International Students Buying Property in Australia?
When it comes to securing a home loan in Australia as an international student, a good credit history plays a crucial role. Here’s why:
1. Loan Approval:
Lenders assess your credit history to determine the risk involved in lending you money. A good credit history demonstrates consistent and timely repayments of past debts, including credit cards or personal loans. This track record increases your chances of loan approval.
2. Interest Rates:
Besides loan approval, your credit score directly influences the interest rate offered on your home loan. A good credit history signifies a lower risk for the lender. This translates into lower interest rates, saving you a significant amount of money over the life of your loan.
3. Loan Amount:
In some cases, lenders might limit the loan amount offered to borrowers with poor credit history. A lower loan amount might restrict your purchasing power, potentially limiting your property options.
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Additional Fee You Need to Pay
Foreign Stamp Duty in Australia
In addition to the usual costs of buying a property, international students must account for foreign stamp duty. In recent years, some Australian states have imposed additional stamp duty levies on foreign buyers purchasing residential property. The surcharge charges vary by state and can reach up to 8% of the property’s value.
Mortgage Application Fees
Mortgage application fees are charges levied by lenders to process and assess a borrower’s mortgage application. These fees vary among lenders, but generally cover administrative costs associated with evaluating the borrower’s financial circumstances and the property’s suitability as collateral.
Mortgage Registration Fee
A mortgage registration fee is incurred when registering a mortgage on the property title with the state or territory land registry. Its purpose is to legally record the mortgage against the property, providing security for the lender in case of default. International students need to factor in this fee as part of the overall costs associated with obtaining a mortgage for property purchase.
Legal and Conveyance Fees
International students are advised to engage a legal expert early in the process to ensure all aspects of the property transaction are legally sound and to budget for these necessary legal expenses. Legal and conveyance fees are expenses incurred for legal services provided by solicitors or conveyancers during the property purchase process.
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Transfer Fee
The transfer fee is a charge imposed by the state or territory government to transfer home ownership into the buyer’s name upon completion of the purchase. It covers the costs associated with updating ownership details in the land registry records.
What will happen to your property if your student visa expires?
If your student visa in Australia expires, the ownership of your property typically remains unaffected, as property ownership is generally not contingent on visa status. However, your ability to reside in or manage the property may be impacted, depending on your legal residency status.
It’s essential to comply with Australian laws regarding residency requirements and foreign investment rules. If your visa expires, and you wish to stay in Australia, you’ll need to secure another visa or residency status.
Wrapping Up!
Whether you’re dreaming of buying a residential or investment property to secure your financial future, the Australian property market welcomes international students with open arms. Understanding the types of properties you can purchase, securing financing, obtaining necessary approvals, and managing associated costs are critical steps in this process. With meticulous planning and professional guidance, you can turn your dream of home ownership into a reality.
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