The article below is by Paul Tiernan, a British expat who moved to Australia in 2006. Paul is a founder of AIMFS, a company that specializes in migrant mortgages.

As any newly arrived migrant, you may find it difficult to decide on whether to rent or buy. Renting means you’ll be using your hard earned money paying for somebody else’s mortgage. However, you do have another option, that’s to buy. If you’re thinking: “Can I get a mortgage as soon as I arrive?” the answer is YES. The type of loan you can get will depend on your financial situation and your employment.

Below you will find my best attempt to cover the major points to think about when securing a mortgage in Australia. As you will appreciate it would not be possible to cover all the points in one single article, so if you should require any further information, do contact me via the email below.

Let’s start with people who do not hold Australian citizenship or full residency status - they too can purchase a property, subject to Foreign Investment Review Board (FIRB) approval. There is a process you will have to go through, an application to fill and some information you need to supply. Click here to learn more.

The most common question people ask me is “What evidence of my income will I need to supply?”. For a Full Doc loan, you will need to supply a copy of your most recent payslips or a letter from your employer detailing your income and length of employment. Different rules apply for LiteDoc loans and for self-employed applicants. You have the choice to have your accountant verify your income or you can certify it yourself.

Now let’s move on to types of loans.

Variable Rate

A Standard Variable home loan offers more flexibility, with many lenders offering additional features such as redraw facilities, chequebooks, the ability to make lump sum payments or to transfer your loan to another property in the future.

A Basic Variable home loan is generally about 1 per cent cheaper but offers few added services. No frills and low cost.

With either type of variable loan the interest rate charged moves up or down with the official ‘cash rates’ as set by the Reserve Bank (RBA). So, if they go up, so do your required repayments, but if they fall so do the required repayments.

Fixed Rate

With a fixed rate your interest rate, therefore your repayments, stay the same regardless of changes to the official ‘cash rates’ set by the RBA. If you think interest rates will rise or you prefer to have some certainty about your repayments over the term of the loan, a fixed loan may be more suitable.

Lenders will normally offer a fixed rate for periods of up to five years. However, if you lock into a fixed mortgage and rates fall, you’ll miss out on the lower rate. Also, during the fixed rate period extra repayments may not be allowed and penalties may apply for early repayment or exit.

Combination (or Split) Loans

A Combination or Split loan offers borrowers the ability to set part of their loan as a variable rate loan and the other part as a fixed-rate loan. It’s akin to having a bet each way, in terms of where rates may go.

Introductory loan - Honeymoon rates

Many lenders offer so-called honeymoon rates. The interest rates offered can be significantly lower than the prevailing variable interest rate, although, the introductory rate only applies for a limited time of usually between six and twelve months. After the introductory period, generally, rates revert to the standard rate of the time.

Home equity loan or Line of Credit mortgage

From lender to lender this type of service can be structured differently, basically, it gives you access to equity that you have built (the difference between asset valuation and amount owed). So, in effect any payment you make can be drawn back out as long as the interest charges are being met. This type of loan may be useful to investors or business.

Transactional Account or All-In-One loan

This type of loan is normally set up as a complete transactional account with the mortgage, savings and cheque account combined. As a rule, all your income and cash deposits are paid into this account which reduces your loan balance. A credit card is often linked to the account and monthly payments drawn from the transactional account. Gains desired could be from utilizing interest free credit card periods to allow income to reduce interest costs.

Mortgage Offset account

The mortgage or loan account is linked to a savings account into which your salary and other cash can be deposited and from which you can withdraw to pay everyday expenses. For as long as money sits in the savings account, it is ‘offset’ against your loan and no interest is charged on that amount.

Low-Doc

A low-doc or no-doc (doc=documentation) loan is ideally suited for investors or self employed borrowers who may not have, or want to share, income records. No tax returns or financial reports are generally required, although, a higher interest rate and/or fees may be charged.

I realize that the descriptions above are only the tip of the iceberg and eventually you will need to discuss you personal preferences and financial situation with a professional - which is where my company comes in.

AIMFS provides loans for expatriate and temporary resident borrowers. We provide a full range of fixed and variable rate loans with standard loan features as outlined above. Funds are available to purchase or refinance an established dwelling, or an off the plan purchase, subject to the borrower obtaining Foreign Investment Review Board approval and appointing a recognized Australian based law firm and Power of Attorney to receive loan documents and notices after settlement.

You can contact me by phone + 61 (7) 56304365 or email info@aimfs.com.au or learn more about our services via our website.

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