Migrating to Australia? The Australian banking sector is very highly regulated and as a result lender’s policy and the level of documentation required can appear daunting to new immigrants. Added to this the concentration of ownership and market share with the four major banks can at times result in a lack of responsive service levels.
One of the most significant differences between Australia and other countries is that Australian lenders cannot lend only on the strength of the asset being offered as security. The lender can no longer simply sell you up to recover their money.
By law you must be able to demonstrate that you can service the debt otherwise a lender making a loan available to you could be deemed to be in breach of the Act and the mortgage contract could be torn up by the courts. Furthermore under the same Act a mortgage broker arranging such a loan could face two years in prison! These laws apply equally to Australian residents as they do to new immigrants so if we appear to be a little pedantic and conservative please try understand where we are coming from.
What does this mean for you? Here are some of the major points;
There are no short cuts – the local bank manager does not have the discretion to waive policy. In Australia responsible lending is law! As a result the process can be drawn out and with many parties eg: agents, valuers, lawyers, existing tenants all potentially involved there is opportunity for delay. Be prepared for this and try not to compound it by unnecessary delay on your part.
You must have permanent employment and preferably with at least two years stable employment history in the same field.
if a probationary period applies this will dramatically reduce your options and restrict your maximum borrowing to 80% of the valuation (LVR – loan to valuation ratio),
contractors in some fields eg: IT may be treated as above however you will need to show a contract with a minimum 12 months to expiry. Other non-tied contractors such as trades will be treated as self employed – see below,
high demand professionals such as doctors, nurses etc may have an easier process as long as they can demonstrate at least 2 years stable prior employment,
if you are self employed you can expect to be asked to wait until you have at least one or two years trading figures. Overseas trading/tax figures are generally not acceptable
you must hold permanent residency status in Australia in order to borrow more than 80% of the value otherwise a temporary residents visa will restrict your borrowing to less than 80% and only a few lenders will consider your application.
Australia is about to introduce ‘positive credit reporting’ at the moment having no credit history is a good thing, however we are unsure how the change will impact lender policy.
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