How to Secure Home Loans for Non-Residents in Melbourne

Securing a home loan as a non-resident in Melbourne can feel like a maze. With unique rules, financial requirements, and different loan products to consider, it’s easy to feel unsure of where to start. 

That’s where mortgage brokers step in. With their expertise, they simplify the process, guide you through your options, and boost your chances of success. From finding competitive rates to comparing lenders, brokers help you navigate the Australian property market to suit your needs.

Ready to learn more about the path to securing a home loan as a non-resident? Let's dive in.

Understanding Non-Resident Home Loans

A non-resident home loan is specifically designed for individuals who aren't citizens or permanent residents of Australia but wish to purchase property in the country. These loans have tailored terms and conditions to accommodate the unique financial and legal situations of non-residents, whether they’re temporary visa holders, foreign nationals living abroad, or even Australian expats seeking to invest back home.

How Non-Resident Home Loans Differ from Standard Home Loans

Non-resident home loans come with a few key differences when compared to standard home loans:

• Deposit Requirements: Non-residents usually need a larger deposit—often 20-30%—whereas Australian citizens or permanent residents may only need around 10%.
• Loan-to-Value Ratio (LVR): The LVR for non-residents is generally lower, limiting the maximum loan amount that can be borrowed.
• Interest Rates & Fees: These loans may carry slightly higher interest rates and additional costs like Foreign Investment Review Board fees (required for foreign property purchases).
• Eligibility & Proof of Income: Lenders typically have stricter criteria, requiring detailed financial documents and proof of overseas income for non-residents.

While the terms may differ, these loans provide a great opportunity for non-residents to invest in the Australian property market.

What Does the 2024 Melbourne Property Market Look Like for Non-Residents Seeking Homeownership?

Melbourne remains a strong choice for non-residents seeking to invest in the Australian property market. With its steady population growth, cultural diversity, and vibrant economy, it’s a city that consistently attracts foreign investors and Australian expats.

2024 Market Snapshot

According to CoreLogic, Melbourne’s median house price in 2024 stands at around AUD 780,000, with a projected growth rate of 2-5% over the year. The city's stable rental market also makes it an attractive option for those looking for investment properties, offering the potential for consistent rental income.

Why Melbourne is Ideal for Non-Resident Investors

• Economic Growth & Stability: Melbourne’s economy is one of the most robust in Australia, providing confidence for long-term property value growth.
• High Demand & Diverse Market: The mix of residential and vacant land properties caters to all types of investors—whether seeking family homes, apartments, or future development opportunities.
• Quality of Living: Consistently ranked as one of the world's most liveable cities, Melbourne offers great infrastructure, education, and a multicultural environment, which appeals to both investors and potential tenants.

Eligibility Requirements for Non-Resident Home Loans

To secure a home loan as a non-resident in Melbourne, you'll need to meet certain criteria set by lenders. Let’s take a quick look at the requirements and the types of non-residents who are eligible.

Key Requirements

Lenders often ask for more documentation from non-residents to assess their financial stability. Here’s what you’ll generally need to provide:

1. Proof of Income: Australian lenders often require evidence of a stable income, which can come from employment contracts, payslips, or business financials for self-employed individuals. Lenders may also want to verify the type of income, whether it's from an Australian source or overseas.
2. Bank Statements: Most lenders need 3-6 months of bank statements to evaluate financial health, including any debts or assets.
3. Visa Status: Your visa type plays a crucial role in determining eligibility. However, some lenders only offer loans to specific visa holders, such as those on longer-term work visas like the 457 or 482.
4. FIRB Approval: Foreign citizens who are not Australian residents need Foreign Investment Review Board (FIRB) approval before buying property. However, Australian expats and New Zealand citizens typically don't need FIRB approval, but it’s best to double-check based on individual circumstances.
5. Credit History: Lenders will evaluate your credit score and history both in Australia (if you have one) and in your home country to assess financial reliability.
6. Identification Documents: A combination of a passport, visa, driver's license, or national ID is usually required for identity verification.

Eligible Non-Residents

• Australian Expats: Australian citizens living abroad are generally eligible for home loans in Australia.
• Temporary Visa Holders: Holders of 457/482 work visas and other temporary visas can be eligible, but the specific loan terms may vary.
• Partner Visa Holders: People with partner visas often qualify, especially if they're residing in Australia.
• Foreign Nationals: Non-residents living outside of Australia are eligible to apply for investment loans, often with stricter requirements.
• New Zealand Citizens: New Zealand citizens typically enjoy similar home loan options as Australian citizens, though conditions may vary by lender.

However, it’s crucial to emphasise that requirements can vary significantly between lenders and also depend on the applicant's situation, type of property, and the overall loan-to-value ratio (LVR) they're seeking. The most accurate advice is always tailored to the specific case, which is why consulting a mortgage broker, such as LM Connect, who understands the nuances of non-resident home loans is highly recommended.

Types of Home Loans for Non-Residents

Non-residents looking to purchase property in Melbourne have a range of loan options. However, the terms and eligibility may differ from those available to Australian citizens. Let’s look at the most common home loans for non-residents:

Standard Variable Rate Loan

A common option, this loan has an interest rate that varies with the market. While it offers flexibility in repayments and the ability to make extra payments without penalties, non-residents may face slightly higher interest rates than residents.

Fixed-Rate Loan

Fixed-rate loans lock in your interest rate for a period (usually 1-5 years), giving you predictable repayments. This is great for budgeting, but some lenders have restrictions on fixed-rate loans for non-residents, and early repayment fees might apply.

Interest-Only Loan

For those purchasing an investment property, an interest-only loan lets you pay only the interest for a set period (typically 1-5 years). However, lenders can be more conservative with these loans for non-residents, often requiring a higher deposit and stricter lending criteria.

Construction Loan

If you're buying vacant land to build on or planning a new development, a construction loan provides funds in stages as the construction progresses. However, non-residents will often need a higher deposit (around 30%) and must demonstrate strong financial stability to be eligible.

Offset Home Loan

Some lenders provide non-residents with an offset account, which links to your mortgage and reduces interest based on your savings balance. This can be an effective way to minimise interest payments, but not all lenders offer this feature to non-residents.

Specialised Loans for High-Income Earners

Certain lenders offer professional home loan packages with benefits like lower interest rates and waived fees, specifically for high-income earners in fields like medicine, law, or finance. However, as a non-resident, you’ll need a strong income and meet specific criteria to qualify.

Government Grants & Programs for Non-Residents

Most non-residents are not eligible for Australian government grants like the First Home Owner Grant (FHOG) in Victoria. The grant, up to AUD 10,000 for newly built properties under AUD 750,000, is generally available only to Australian citizens, permanent residents, or New Zealand citizens on a special category visa (subclass 444). Temporary visa holders and other foreign nationals typically do not qualify.

Non-residents should also consider stamp duty surcharges for foreign buyers in Victoria, as they significantly increase the overall  cost of purchasing property.

Final Note on Lending to Non-Residents

Lending criteria for non-residents can vary greatly between lenders, and many require a deposit of 20-30%, as well as additional documentation, such as proof of foreign income, visa status, and strong credit history. Consulting a mortgage broker with experience in non-resident loans can help you understand the best options for your situation.

Steps to Securing Your Home Loan as a Non-Resident

Securing a home loan as a non-resident in Melbourne involves careful planning and understanding the process. Here are the essential steps to help you get started on purchasing a residential property:

1. Assess Your Borrowing Capacity

Non-resident borrowers need to know how much they can afford to borrow. Your borrowing capacity depends on several factors like your income, debts, and the purchase price of the property. Lenders may assess your income in foreign currency differently, so make sure to clarify how your country of residence impacts the calculations.

2. Find the Right Lender

Compare Australian banks and non-bank lenders to see who offers competitive interest rates. It’s crucial to understand the type of loan available to non-residents, such as fixed-rate or variable-rate loans. A comparison rate can help you evaluate the true cost of different loans, factoring in both the interest and fees.

3. Start Your Property Search

Before proceeding with the loan application process, have a general idea of the property prices in the area you're interested in. Your type of property (whether an apartment, house, or vacant land) will influence your eligibility and the loan amount you can borrow.

4. Prepare Your Loan Deposit

Non-resident borrowers typically need a higher deposit, often 20-30% of the property's purchase price. Temporary residents might require an even larger loan deposit. Be prepared for additional costs like application fees and potential stamp duty surcharges.

5. Organise Financial Documents

Gather all necessary loan documents before applying. These include proof of income, bank statements, and credit history. A strong record of consistent income and stable employment will increase your chances of loan approval.

6. Submit Loan Applications

Submit your loan application with the lender you’ve chosen. The loan application process may vary by lender, but typically includes a financial assessment and a valuation of the property. Ensure your documentation is complete for a smooth process.

7. Receive Approval and Plan for Loan Repayments

Once your loan is approved, plan for your loan repayments based on the agreed terms. Knowing your repayment schedule helps manage your finances better and ensures you're prepared to make timely payments throughout the loan term.

By following these steps, non-resident borrowers can navigate the path to owning residential property in Melbourne with more confidence. Consulting a mortgage broker can also help simplify the process and provide tailored advice for your unique situation.

Real-Life Case Study: Maria, A Temporary Resident Buyer

Background:  Maria, an Italian national, moved to Melbourne on a temporary resident visa for work. Eager to buy her own home, she contacted LM Connect to explore her options.

Challenge:  As a non-permanent resident with foreign income, Maria was unsure about her eligibility requirements. She didn't know how to navigate the Australian property market, and the different loan types available were confusing.

Solution:   LM Connect  assisted Maria in understanding her borrowing capacity and guided her through the FIRB approval. They found a lender willing to finance 70% of the property value, and helped her secure a fixed-rate loan with favourable terms.

Outcome:  Within three months, Maria purchased her first home in Melbourne and started her journey as a homeowner in Australia.

FAQs

Can non-residents buy a home in Melbourne?

Yes, but you'll need FIRB approval and adhere to visa status regulations.

How much deposit is required for a non-resident home loan?

Typically, a 20-30% deposit is required, depending on your status and type of loan.

Can I use rental income to qualify for a loan?

Yes, rental income from investment properties can boost your borrowing capacity.

Do all lenders offer loans to non-residents?

No, it's best to seek help from non-resident lenders or a broker like LM Connect to find suitable options.

Are there extra fees for non-resident loans?

Yes, you may face higher Stamp Duty, FIRB fees, and application fees.

Can temporary residents buy vacant land?

Yes, but you'll need FIRB approval, and the land must be developed within a certain timeframe.

Conclusion

Getting a home loan as a non-resident in Melbourne is a great opportunity to invest in one of Australia's most dynamic cities. With the right guidance, understanding your options, and preparing your documents, you can confidently take steps toward your property goals. 

If you’re ready to get started or need some expert advice, reach out to our friendly team at  LM Connect. Call us at 0423 713 362 or visit LM Connect—let’s find the right home loan for you!