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Auastralian lending institutions will examine your most recent income statement, your expenses, your assets, and your current earning potential, as well as verify the buyer's income. Income which is deemed acceptable for qualification purposes may be determined by the following: self-employment ,commission bonuses, and average overtime income based over 20 months. Salary is determined at youtr current levels.

Monthly income is derived from your hourly wage by the number of hours worked per month. In an effort to expedite the income verification process, one needs to first gather as much historical records reflecting income sources, monthly expenses,the amount of money saved each year, any investment portfolios, insurance policies or any other financial evidence. Knmowing in advance what the financial institution will require, will enable you to present the strongest case in obtaining the loan for the house that you intend to buy.

AFFORDABLITY and ELIGIBILITY

The fisrt step is to decide on the maximum price you will be willing to pay for a home, then add any available cash you have for a deposit. The size of the loan is expressed as the percentage of the purchase price. If you have no deposit and are looking for a 100% mortgage then you will most likely qualify for a smaller home but will probably pose as more of the financing risk, as expressed through higher interest rates on your mortgage loan contract.

For mortgage loan applications submitted by joint borrowers, then the likely underwriting loan calculator will include 3.25 times the first income, plus one times the second income, or 2.5 times joint income. Additional to your overall home equity loan application is whether your home purchase is a first time purchase. If so, then additional Australian Commonwealth grant monies may be available to you.

The First Home Owner Grant became effective on 1 July, 2000. The First Home Owner Grant came into existence as a means to offset the economic cost and impact arising from the introduction of GST (goods and services tax), and for political reasons as much as any other factor, the Commonwealth sought to "give back" by way of an incentive to first home buyers where persons may qualify for $7,000 in grant monies (which do not have to be paid back). In order to qualify, one must be first able to demonstrate that he/she is an Australian citizen or permanent resident thereof. You must also establish that you are buying or building your first home in Australia. Neither the person applying for the First Home Owner Grant nor his/her spouse or de facto must have previously owned a house either singly, jointly or with any other person. The subject property must be located in Australia and may be either an established house or a new house, or unit or flat or related self contained dwelling in conformity with municipal planning regulations and codes.

Administration of the Commonwealth First Home Owner Grant program is the responsibility of each State and Territory Revenue Office. To determine if you qualify for this First Home Owner Grant, you need to contact your representative Revenue Office based on your location. Essentially, the First Home Owner Grant provides a once-time payment of $7,000 to eligible persons.

The desired home to be purchased must be intended to be used as the primary residence. Your financial strengths or weaknesses do not feature in qualifying for the First Home Owner Grant of $7,000. This Grant is not means tested, meaning that your income and assets do no feature in the grant allocation process. Notwithstanding, joint applicants are restricted to a common application in order to qualify for the one time Grant of $7000. In other words, only one payment of $7,000 can be made. If one believes that the First Home Owner Grant of $7,000 is an important component to your mortgage loan application position, then he/she will need to first clarify with your State of Territory Revenue office on their qualifications, plus do any research of any small changes or requirements that may vary slightly between the States.

In order to satisfy the mortgage insurance underwriting requirements, the security property will need to be of an acceptable standard plus you as the borrower will be required to demonstrate your ability to meet regular repayment requirements. The kinds of property acceptable as security for mortgage loan underwriting include villas and vacant land, semi-detached and terrace houses, freestanding dwellings, home units and townhouses. In turn, most titles are acceptable, including torrens, strata and community titles. Additionally in certain cases leasehold and other titles may also be acceptable subject to underwriting review.

MORTGAGES for NON-RESIDENTS of AUSTRALIA

Not all lenders in Australia will offer mortgage loans to a person he/she is not a resident of Australia or New Zealand. However, the majority of large lenders will lend to non-residents. There may be a few restrictions that you need to consider.

Maximum Loan

The maximum any lender in Australia will lend to a non-resident is up to 80% of a property’s value. In fact, some lenders will restrict the maximum loan to value ratio even further to 70% or lower. This means that purchasers need to have at least 20% of the purchase price as a deposit. Purchasers will also need to pay for costs such as stamp duty and legal fees. You need to allow approximately 5% to 5.5% for these costs.

Foreign Purchasers

If you are not a citizen of Australia (or if you do not hold a permanent residency visa) you may have to apply to the Foreign Investment Review Board for approval to purchase property in Australia.

Borrowing Capacity

Borrowing capacity can vary greatly amongst the lenders in Australia. In addition, lenders assess non-residents differently to residents. The lender will consider the stability of the currency of the income that you receive. They will only take into account stable currencies such as US dollar and British Pound Sterling. They may not consider lending to a person that is paid in a volatile currency. Some lenders include a foreign exchange risk margin. This is essentially a buffer margin to take into account any movements in the exchange rate. Obviously this reduces your borrowing capacity.

Foreign Currency Loans

Some lenders allow borrowers (residents and non-residents) to borrow in a foreign currency so long as their main source of revenue is received in the same currency. For example, if a person is working in the UK and is paid in British Pound Sterling (GBP) then they can borrow in GBP from an Australia bank. The interest rate is the same. The benefit of this is that you will not be exposed to exchange rate movements.

Executing Loan Documents

Loan documents will need to be mailed overseas to be signed. This can take extra time. You should take this into account when negotiating the settlement period. In some cases, you may be able to use a Power of Attorney to sign documents if one exists within Australia.

SERVICE FEES

With many mortgage lenders, small service fees are built into your home loan. For instance, a typical set of service fees might include monthly service fees for:

(a). $8 to $10 for either fixed or variable rate home loans
(b). A 100% offset fee of $10
(c). Annual home mortgage facility fees of $200 to $300

Government Fees

A mortgage lender or bank will collect certain charges on behalf of the government and in turn pass on the full amount. These Government fees are not to be confused with bank fees. Government fees may include stamp duty on the mortgage, stamp duty on the transfer of land and other titles oFice charges.

Economic Cost

In the event that a home loan is paid out before the expiry of the designated fixed rate term, then you the purchaser will be responsible for paying an economic cost fee. This is calculated by the mortgage issuer or bank as the diFerence between their cost of funds at the start of the relevant fixed rate period and its cost of funds at the date of termination or prepayment over the remainder of that period. The economic cost is the bank's estimate of its loss (if any) from the early termination of the loan by way of your prepayment. Industry standards and marketplace competitive realities compel the bank to make a "reasonable" calculation of alleged losses based on your pre-payment. Their recovery of book losses relates to the time-value concept of money and, in particular, how the bank structures its loan portfolio in terms of "mix of maturities" e.g. dates when home mortgage loans end in proportion to the underlying cost of funds as regulated by the reserve bank monetary authorities. The bank's calculated economic cost is then discounted back to the net present value at the rate equivalent to the bank's cost of funds at that date.

Pre-Payment Fees

Expect pre-payment loan fees to be between $300 to $500 based on your mortgage contract and property particulars. Additionally, you'll have to pay economic costs (bank's book loss) in order to close the mortgage contract obligation. If at that time you own the property outright (e.g. no then current mortgage obligation) then you or your solicitor will have to arrange for documentation changes at the title oFice. The home loan market within Australia is essentially divided into two areas: rural and metropolitan. Many farmers pay over 10% interest rates for credit needs such as for mortgage finance, despite the fact that the capital cities interest rates might be three percentage (3%) points lower. Additional the rural borrower is especially disadvantaged by certain bank lending practices requiring as much as 60% equity in their property before qualifying for the same loan that would be sold to someone in Perth with only 20% equity requirement.

What range of costs can to expect? The cost of LMI varies depending on the amount of the loan and the level of your equity in the security property. In contrast to traditional insurance, lender mortgage insurance is a once-only premium payable at settlement or when the loan funds are advanced and provides cover for the full term of the loan.

ADDITIONAL COSTS and EXPENSES

Conveyance

Typically, the registry office is the official location where property title records and deeds of sale are recorded and kept on file. The registry office, in their official legal capacity as holder of record, serves the market by providing the force of law in the recording of documents related to property ownership. Without this fundamental service, as occurs in much of the undeveloped world (Africa, Asia, Latin America), parties would not agree on property boundaries, deeds could not be created, banks would not issue mortgage credit, and buying and selling of buildings and land would take as much as 18 years (Egypt) rather than days or weeks as is available in Australia.

Typically the registry office records all real estate transfers, mortgages, liens, judgments, etc. affecting all property located in a boundaried municipal area. In addition to creating official mortgage records and title transfer records, the registry office cancels mortgages, liens, judgments, etc. Additionally, the office records military discharges, medical certificates, corporation charters and partnerships as well as cancellation of property bonds and bond forfeitures and the cancellation of inscriptions by prescription, and issues certificates of cancellation of cancelled mortgage inscriptions, business trade name affidavits, and documents concerning oil and gas, or other mineral, leases and interest transfers and liens. Charges are established according to the nature of the transaction, number of pages or documents, registrations, cancellations, dissolutions, number of names for indexing, lawyers expenses if any and so on.

HELPFUL LINKS :

http://www.mortgage-loans.com.au

http://www.firb.gov.au