Home Loan Requirements - OZ
May 15th 2014, 4:29 am
#1
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Home Loan Requirements - OZ
Here is what you need to qualify for a Home Loan In Australia. These are general guidelines only and you should contact a professional to assess your personal situation!
1. Deposit - 5 % of the home value is normally the minimum required for a home loan. In some cases you can use equity from another home you own or from a guarantor/family member's home. A Deposit should be held in a bank account for 3 months. Term deposits and shares are normally considered as usable for a deposit. Proceeds from a home sale are also acceptable.
2. Loan Amounts: Home Loans - Parmanent Residents - up to 95 % of the Home Value plus financing of the Loan Mortgage Insurance (LMI). Non Residents normally up to 80% with one bank up to 90%.
3. Other Fees and Charges:
Loan Mortgage Insurance (LMI) or a security fee is normally payable on loans above 80% of the Home Value. In most cases this can be financed and included on top of the Home Loan Value (added onto it).
Settlement/Legal Costs - Normally $ 2 k - $ 5 k depending on the value of the home.
Stamp Duty or Transfer Duty - Varies from State to State - check with the State Treasury that you are buying in.
There may be other fees and charges by the banks etc.
4. Income to service the loan is required. Normally from employment (full time, part time, casual), however income from centerlink, investments, rental income and other sources may be included. Other expenses such as living, number of kids, other debt repayments, credit cards etc will reduce the amount you can borrow.
5. Employment period. Whilst you can get a loan with one day's employment, lenders wish to see a minimum of 3 months and in some case up to 2 years employment in same industry. The longer you are employed the more lender options you have. Being on probation will affect you getting a loan by most lenders.
6. Self Employed. Most lenders will want 2 years full financials before they will lend however some lenders will do with 12 months of financials and/or 12 months of BAS and GST registration.
7. Credit History. Lenders prefer those with a clear (good) credit history showing that payments have been made on time. If you have an impaired or bad credit file (defaults, court writs and bankruptcy) then most larger banks will decline the loan. Most lenders will ignore a minor default such as a small uppaid telephone bill. However, there are specialist lenders who will still provide loans to you - it will just cost you a bit more!
8. Residency. Non Permanent residents such as those on 457 visa can get a loan however there are some restrictions. The Loan Value Ratio (LVR) will be normally no more than 80% of the home value with one lender doing up to 90 LVR. Foreign Investment Review Board (FIRB) approval will be required as well. As a Non Resident you are not entitled to most state stamp duty concessions and / or the FHOG.
9. First Home Owner Grant (FHOG) and other Stamp Duty concessions. If you a permanent resident then you will be entitled to the the FHOG and other concessions. As a Non Resident ie 457 Visa, then generally you are not entitled to any state concessions or FHOG. Each state varies what they offer as a FHOG and each state sets different home/land values for determining stamp duty concessions. Check your state treasury site for updated information.
SUMMARY - if you have good stable employment and income, good credit history, funds to cover fees and a deposit then normally you will qualify for a home Loan.
It is best to discuss your situation with a professional as they can find and structure your loan correctly, obtain a lower cost loan and advise you on any issues that you may have.
Cheers John
1. Deposit - 5 % of the home value is normally the minimum required for a home loan. In some cases you can use equity from another home you own or from a guarantor/family member's home. A Deposit should be held in a bank account for 3 months. Term deposits and shares are normally considered as usable for a deposit. Proceeds from a home sale are also acceptable.
2. Loan Amounts: Home Loans - Parmanent Residents - up to 95 % of the Home Value plus financing of the Loan Mortgage Insurance (LMI). Non Residents normally up to 80% with one bank up to 90%.
3. Other Fees and Charges:
Loan Mortgage Insurance (LMI) or a security fee is normally payable on loans above 80% of the Home Value. In most cases this can be financed and included on top of the Home Loan Value (added onto it).
Settlement/Legal Costs - Normally $ 2 k - $ 5 k depending on the value of the home.
Stamp Duty or Transfer Duty - Varies from State to State - check with the State Treasury that you are buying in.
There may be other fees and charges by the banks etc.
4. Income to service the loan is required. Normally from employment (full time, part time, casual), however income from centerlink, investments, rental income and other sources may be included. Other expenses such as living, number of kids, other debt repayments, credit cards etc will reduce the amount you can borrow.
5. Employment period. Whilst you can get a loan with one day's employment, lenders wish to see a minimum of 3 months and in some case up to 2 years employment in same industry. The longer you are employed the more lender options you have. Being on probation will affect you getting a loan by most lenders.
6. Self Employed. Most lenders will want 2 years full financials before they will lend however some lenders will do with 12 months of financials and/or 12 months of BAS and GST registration.
7. Credit History. Lenders prefer those with a clear (good) credit history showing that payments have been made on time. If you have an impaired or bad credit file (defaults, court writs and bankruptcy) then most larger banks will decline the loan. Most lenders will ignore a minor default such as a small uppaid telephone bill. However, there are specialist lenders who will still provide loans to you - it will just cost you a bit more!
8. Residency. Non Permanent residents such as those on 457 visa can get a loan however there are some restrictions. The Loan Value Ratio (LVR) will be normally no more than 80% of the home value with one lender doing up to 90 LVR. Foreign Investment Review Board (FIRB) approval will be required as well. As a Non Resident you are not entitled to most state stamp duty concessions and / or the FHOG.
9. First Home Owner Grant (FHOG) and other Stamp Duty concessions. If you a permanent resident then you will be entitled to the the FHOG and other concessions. As a Non Resident ie 457 Visa, then generally you are not entitled to any state concessions or FHOG. Each state varies what they offer as a FHOG and each state sets different home/land values for determining stamp duty concessions. Check your state treasury site for updated information.
SUMMARY - if you have good stable employment and income, good credit history, funds to cover fees and a deposit then normally you will qualify for a home Loan.
It is best to discuss your situation with a professional as they can find and structure your loan correctly, obtain a lower cost loan and advise you on any issues that you may have.
Cheers John
Jun 10th 2014, 4:51 am
#2
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Home Loans: Employment & Probation.
Most Lenders will not look at you whilst you are on probation. You normally will have to wait until Probation has been finished before you can apply.
We have now one lender who will consider you whilst on Probation but their maximum Loan Value Ratio - the amount they will Lend to you - is 85% of the Home Value. Whilst they do not use a Loan Mortgage Insurer they do charge a Risk Fee of 1.75% of the Loan Value.
Also, depending on the strength of the deal ie you having a large deposit of say 20% or more, then some lenders may look at providing finance whilst you are still on probation.
If unsure of your circumstances and you need help then contact me via my signature POC or PM.
Cheers John
We have now one lender who will consider you whilst on Probation but their maximum Loan Value Ratio - the amount they will Lend to you - is 85% of the Home Value. Whilst they do not use a Loan Mortgage Insurer they do charge a Risk Fee of 1.75% of the Loan Value.
Also, depending on the strength of the deal ie you having a large deposit of say 20% or more, then some lenders may look at providing finance whilst you are still on probation.
If unsure of your circumstances and you need help then contact me via my signature POC or PM.
Cheers John
Last edited by john in oz; Oct 22nd 2014 at 3:48 am. Reason: update
Jun 13th 2014, 3:37 am
#3
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Stamp Duty & First Home Owners Infomation
Hi there - this is to help point you in the right direction on where to get updated information on Stamp Duty, Concessions on Stamp Duty and the First Home Homers Grant (FHOG) Information from.
Each State has different rates of duty, different concessions on duty for FHOG recipients and different Offerings for those that qualify for the FHOG.
1. What to look for and be aware of.
a. FHOG is not normally available to those who have owned a home in Australia before. If you lived in a home as a partner/spouse and your name was not on the title you should check with the relevant state department to see if you may still qualify for it.
b. FHOG in some states may not be available if you have owned property or currently own property overseas. You need to check with the relevant state department. Currently QLD has some restrictions in this regard.
c. In many states now the FHOG is for only to build new dwellings or build a new one. In some states they will offer you a smaller grant if you purchase an existing property ie WA provides 3K for an existing and 10K for a new home build/Purchase.
d. There are different Duty concessions for land purchase in some states.
e. The FHOG can be used by some lenders as savings for the deposit or at least funds for settlement. This reduces the amount of money you have to save up for to get into a property.
f. In some states those who brought on a visa ie 457 can then get the FHOG paid back to you if you became a Permanent resident within 12 months of settling on a home. (I believe this is the case in WA at least)
g. You have to be a permanent resident to qualify for the Concessions and grants normally.
Every State is different and rules change CONSTANTLY so it is IMPORTANT that you check with them first before making any offers on a property.
as as I get time I will put further detail under the links of the various state departments below on what is on offer by them.
STATE REVENUE SITES:
QUEENSLAND
https://www.osr.qld.gov.au
NEW SOUTH WALES
Office of State Revenue
Short Notes:
First Home Owners Grant Scheme Home Value Capped at $ 650.000 to 30 June 2014. Home Value is capped at $ 750,000 from 01 July 2014
VICTORIA
http://www.sro.vic.gov.au
SOUTH AUSTRALIA
http://www.revenuesa.sa.gov.au/
FHOG is currently $ 15,000 for construction or new residents - it is unavailable for established homes now.
http://www.revenuesa.sa.gov.au/graht...st-home-owners
Housing Construction Grant is no longer available
Some Off the Plan Apartment Stamp Duty Concessions remain until 30 June 2016
There is also a Seniors Housing Grant for those over 60 years of age for construction of or purchase of a new home. It is not available in addition to the FHOG. SHG is currently $ 8500 for a property up to the value of $ 400,000 and then phases out until it reaches a value of $ 450,0000.
WESTERN AUSTRALIA
https://www.finance.wa.gov.au/cms/content.aspx?id=2077
$ 10,000 FHOG is available only for new homes never lived in before and construction of new dwellings. No FHOG available for existing homes now.
Stamp Duty concessions are available on Land up to $ 300 K as well as homes up to $ 430 K with it reducing from $ 430 K onwards until the concession ceases at $ 530 K. No concession is available on homes from $ 530 K.
NORTHERN TERRITORY
Department of Treasury and Finance
TASMANIA
State Revenue Office
AUSTRALIAN CAPITAL TERRITORY
Home - ACT Revenue Office
Summary - It is important to check with the State Treasury on your entitlements so you do not have funding shortfalls when you purchase the property.
If you need help on anything then let me know. Cheers John
Each State has different rates of duty, different concessions on duty for FHOG recipients and different Offerings for those that qualify for the FHOG.
1. What to look for and be aware of.
a. FHOG is not normally available to those who have owned a home in Australia before. If you lived in a home as a partner/spouse and your name was not on the title you should check with the relevant state department to see if you may still qualify for it.
b. FHOG in some states may not be available if you have owned property or currently own property overseas. You need to check with the relevant state department. Currently QLD has some restrictions in this regard.
c. In many states now the FHOG is for only to build new dwellings or build a new one. In some states they will offer you a smaller grant if you purchase an existing property ie WA provides 3K for an existing and 10K for a new home build/Purchase.
d. There are different Duty concessions for land purchase in some states.
e. The FHOG can be used by some lenders as savings for the deposit or at least funds for settlement. This reduces the amount of money you have to save up for to get into a property.
f. In some states those who brought on a visa ie 457 can then get the FHOG paid back to you if you became a Permanent resident within 12 months of settling on a home. (I believe this is the case in WA at least)
g. You have to be a permanent resident to qualify for the Concessions and grants normally.
Every State is different and rules change CONSTANTLY so it is IMPORTANT that you check with them first before making any offers on a property.
as as I get time I will put further detail under the links of the various state departments below on what is on offer by them.
STATE REVENUE SITES:
QUEENSLAND
https://www.osr.qld.gov.au
NEW SOUTH WALES
Office of State Revenue
Short Notes:
First Home Owners Grant Scheme Home Value Capped at $ 650.000 to 30 June 2014. Home Value is capped at $ 750,000 from 01 July 2014
VICTORIA
http://www.sro.vic.gov.au
SOUTH AUSTRALIA
http://www.revenuesa.sa.gov.au/
FHOG is currently $ 15,000 for construction or new residents - it is unavailable for established homes now.
http://www.revenuesa.sa.gov.au/graht...st-home-owners
Housing Construction Grant is no longer available
Some Off the Plan Apartment Stamp Duty Concessions remain until 30 June 2016
There is also a Seniors Housing Grant for those over 60 years of age for construction of or purchase of a new home. It is not available in addition to the FHOG. SHG is currently $ 8500 for a property up to the value of $ 400,000 and then phases out until it reaches a value of $ 450,0000.
WESTERN AUSTRALIA
https://www.finance.wa.gov.au/cms/content.aspx?id=2077
$ 10,000 FHOG is available only for new homes never lived in before and construction of new dwellings. No FHOG available for existing homes now.
Stamp Duty concessions are available on Land up to $ 300 K as well as homes up to $ 430 K with it reducing from $ 430 K onwards until the concession ceases at $ 530 K. No concession is available on homes from $ 530 K.
NORTHERN TERRITORY
Department of Treasury and Finance
TASMANIA
State Revenue Office
AUSTRALIAN CAPITAL TERRITORY
Home - ACT Revenue Office
Summary - It is important to check with the State Treasury on your entitlements so you do not have funding shortfalls when you purchase the property.
If you need help on anything then let me know. Cheers John
Last edited by john in oz; Oct 14th 2015 at 1:55 am. Reason: Update
Aug 14th 2014, 10:14 am
#4
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Temporary Residents Home Loans - Additional Requirements
Temporary Residents - Home Loan Additional Requirements
In addition to the normal Home Loan requirements the following applies:
1. Lending amount: Most banks will only lend 80% of the home value with one bank extending this to 90% of the home value.
2. Foreign Investment Review Board (FIRB) approval is required for the purchase and should be a condition of the Offer and Acceptance for the land / building.
3. Government Grants: Additionally, if a non permanent resident then you are not entitled to any discounts or First Home Owner Grants from the State or Federal Government. However, in some states they still provided a building grant regardless of residency. This changes on a regular basis and you need to check with your State Revenue Department.
This means that to purchase a $ 500 K home you will need normally 20% deposit, plus stamp duty and other bank costs, therefore you would need to look at around $ 100,000 plus costs and stamp duty as a minimum to qualify for a loan from most banks. If at 90% lend then $ 50,000 deposit plus costs and then Loan Mortgage Insurance as well!
If you are a permanent resident then you can get a loan with 5% deposit and any State Government Concessions that may be available - check your state government Treasury site for more details. Please note that in some states if you have owned a home in another country you will not qualify for any discounts or grants from the government.
4. Employment - the longer employed in Australia the more Lender/Loan Options are then available to you.
Please refer to our post on home loan requirements for more information.
Cheers John
In addition to the normal Home Loan requirements the following applies:
1. Lending amount: Most banks will only lend 80% of the home value with one bank extending this to 90% of the home value.
2. Foreign Investment Review Board (FIRB) approval is required for the purchase and should be a condition of the Offer and Acceptance for the land / building.
3. Government Grants: Additionally, if a non permanent resident then you are not entitled to any discounts or First Home Owner Grants from the State or Federal Government. However, in some states they still provided a building grant regardless of residency. This changes on a regular basis and you need to check with your State Revenue Department.
This means that to purchase a $ 500 K home you will need normally 20% deposit, plus stamp duty and other bank costs, therefore you would need to look at around $ 100,000 plus costs and stamp duty as a minimum to qualify for a loan from most banks. If at 90% lend then $ 50,000 deposit plus costs and then Loan Mortgage Insurance as well!
If you are a permanent resident then you can get a loan with 5% deposit and any State Government Concessions that may be available - check your state government Treasury site for more details. Please note that in some states if you have owned a home in another country you will not qualify for any discounts or grants from the government.
4. Employment - the longer employed in Australia the more Lender/Loan Options are then available to you.
Please refer to our post on home loan requirements for more information.
Cheers John
Oct 6th 2014, 2:02 am
#5
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Should I sell my UK Home or Rent it Out?
Everyone's situation is different. Basically it will depend on your financial position and whether you are making OZ home and then whether you need to release equity in the UK home to buy here etc. If you are unsure about staying in OZ then it is probably better to not sell and see how things go here first.
If you own the home and or have a large amount of equity it may be more viable to keep it as an investment producing income which can be used for retirement and / or buying a house here.
You may need to release equity in a home so you have funds to buy in OZ. You may need to sell up so you can service a loan here if the UK property is negative cash flow.
You may need to sell off as you can not afford to maintain repayments etc.
Notes:
1. Some banks charge you extra for renting out the home than if you living in it.
2. Capital gains is not normally payable until 3 years have passed in the UK. If you a non resident no capital gains is currently payable at all. These rules are changing from april 2015 where you will be liable for CGT.
3. Capital gains is not applicable for 6 years in OZ if it is your primary residence.
4. Tax is payable on Income within the UK and any UK income received is required to be disclosed in OZ as well.
5. You should seek professional advice from a Tax professional in both UK and in OZ when making decision as the rules change on a regular basis.
The above is general advice only!! :-)
If you own the home and or have a large amount of equity it may be more viable to keep it as an investment producing income which can be used for retirement and / or buying a house here.
You may need to release equity in a home so you have funds to buy in OZ. You may need to sell up so you can service a loan here if the UK property is negative cash flow.
You may need to sell off as you can not afford to maintain repayments etc.
Notes:
1. Some banks charge you extra for renting out the home than if you living in it.
2. Capital gains is not normally payable until 3 years have passed in the UK. If you a non resident no capital gains is currently payable at all. These rules are changing from april 2015 where you will be liable for CGT.
3. Capital gains is not applicable for 6 years in OZ if it is your primary residence.
4. Tax is payable on Income within the UK and any UK income received is required to be disclosed in OZ as well.
5. You should seek professional advice from a Tax professional in both UK and in OZ when making decision as the rules change on a regular basis.
The above is general advice only!! :-)
Oct 8th 2014, 12:30 am
#6
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Difference between Cash Rate and Interest Rate?
The Reserve Bank of Australia (RBA) sets the Cash Rate and individual Lenders set their Interest Rates.
The cash rate is the market Interest rate on Overnight Funds. This influences the cost of money to financial institutions who in part may use these funds to provide home loans to the public.
So if the Cash Rate increases then so normally does your Home Loan Interest rate as the Lenders still need to make a profit on the loans they give out.
If the Cash Rate drops then the Lenders may also reduce their Interest rates making Home Loans cheaper - however there is no guarantee that they will do so and there is no legal requirement for them to do so.
You can protect yourself against future interest rises by simply fixing all or part of your home loan!
The cash rate is the market Interest rate on Overnight Funds. This influences the cost of money to financial institutions who in part may use these funds to provide home loans to the public.
So if the Cash Rate increases then so normally does your Home Loan Interest rate as the Lenders still need to make a profit on the loans they give out.
If the Cash Rate drops then the Lenders may also reduce their Interest rates making Home Loans cheaper - however there is no guarantee that they will do so and there is no legal requirement for them to do so.
You can protect yourself against future interest rises by simply fixing all or part of your home loan!
Nov 25th 2014, 2:51 am
#7
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
To Fix or Not to Fix Interest Rates
One of the main reasons to lock in rates is simply so you know what you are paying in the future and can manage cash flows. It also can provide a buffer against future rises but then you lose out on any falls.
With Home values so high and loans sizes increasing all the time - we often recommend fixing a proportion of the loan to protect the client against short term rate increases.
In most cases we work out what the client can pay off the loan and any extra amount they can possibly afford and then apply that over the intended time period. We then allow a bit extra and lock the remaining amount in as fixed.
ie if client can pay off $ 30 k plus an extra $ 20 K being a total of $ 50 K off the loan each year then over 3 years this would be $ 150 K - We then add another $ 50 K to this figure ie total to stay as variable in this example would be $ 200K If loan size is $ 500 K we would then lock in $ 300 K for 3 years.
When a loan is fixed normally the lender restricts how much extra you can pay off the loan before applying a penalty fee or interest to you loan for doing so. Most lenders allow $ 10 K extra per year but you have to watch out as they may apply a Monthly Limit as well. ie 833 pm if $ 10 K per year.
Banks current strategy is to stop you moving to other lenders who offer low rates by offering cheaper fixed rates. In many cases the true rate after all fees and charges can be an extra 0.5 to 1.0 % above the advertised rate ie advertised 4.8% fixed 3 years with a comparison rate of 5.5% (true rate after fees).
So it is important to review what rates are on offer and how much you can pay off in a certain period before locking yourself in. You may also wish to consider any expected payments coming your way such as inheritances etc. In some cases it may be more beneficial to change lenders altogether but you should seek advice on this and the above.
With Home values so high and loans sizes increasing all the time - we often recommend fixing a proportion of the loan to protect the client against short term rate increases.
In most cases we work out what the client can pay off the loan and any extra amount they can possibly afford and then apply that over the intended time period. We then allow a bit extra and lock the remaining amount in as fixed.
ie if client can pay off $ 30 k plus an extra $ 20 K being a total of $ 50 K off the loan each year then over 3 years this would be $ 150 K - We then add another $ 50 K to this figure ie total to stay as variable in this example would be $ 200K If loan size is $ 500 K we would then lock in $ 300 K for 3 years.
When a loan is fixed normally the lender restricts how much extra you can pay off the loan before applying a penalty fee or interest to you loan for doing so. Most lenders allow $ 10 K extra per year but you have to watch out as they may apply a Monthly Limit as well. ie 833 pm if $ 10 K per year.
Banks current strategy is to stop you moving to other lenders who offer low rates by offering cheaper fixed rates. In many cases the true rate after all fees and charges can be an extra 0.5 to 1.0 % above the advertised rate ie advertised 4.8% fixed 3 years with a comparison rate of 5.5% (true rate after fees).
So it is important to review what rates are on offer and how much you can pay off in a certain period before locking yourself in. You may also wish to consider any expected payments coming your way such as inheritances etc. In some cases it may be more beneficial to change lenders altogether but you should seek advice on this and the above.
Oct 14th 2015, 1:51 am
#8
BE Enthusiast
Thread Starter
Joined: Feb 2014
Posts: 592
Re: Home Loan Requirements - OZ
The $ 3,000 First Home Owners Grant for established homes in WA is no longer available from the 03 Oct 2015.
However the $ 10,000 FHOG still remains for new buildings and construction.
Stamp duty concessions for both homes and land remain in place unchanged. Therefore, even though you do not get the $ 3 K you may still get stamp duty relief.
However the $ 10,000 FHOG still remains for new buildings and construction.
Stamp duty concessions for both homes and land remain in place unchanged. Therefore, even though you do not get the $ 3 K you may still get stamp duty relief.
