The Foreign Investment Review Board (FIRB) is a federal government body in Australia that takes into consideration all foreign direct investment in Australia. Basically it assesses applications by foreigners to invest within the country. It includes people looking for a place to call home, as well as those looking for investment properties.
This can include foreigners on a working visa in Australia, expatriate Australians living overseas and foreigners looking for investment properties whilst overseas or on a short visit to the country.
With real estate and property investment, FIRB will assess and either approve or decline a foreign application for a loan. This is important as legislation prohibits some prospective buyers from financing a loan through a bank or lender if they do not have approval.
Read on to find out more about who must apply to FIRB when purchasing real estate. To see where FIRB fits into mortgage applications you can also read our page on the property buying process.
Who Needs Approval?
You can still apply for a loan!
Don’t worry. Generally, applying for FIRB approval is just one more step on the way to financing real estate or property through a bank or lender.
There are some exceptions to FIRB approval, even when buying from overseas at the time. Australian citizens are exempt and permanent residents New Zealand citizens are also able to purchase residential without approval.
Those that may need to consider FIRB approval are Temporary Australian residents. No matter what type of residential property you are buying as a temporary resident you are required to notify the FIRB. Temporary residents are also not permitted to buy established dwellings as investment properties.
FIRB approval is mandatory if you are looking for property in Australia and you are a foreign citizen! Unless you fall into the above categories you will need to gain FIRB approval before you can consider investing in the country.
In summary, you will not need FIRB approval to purchase property in Australia if;
- You are an Australian citizen living outside the country
- You are purchasing residential real estate in both names as joint tenants (not tenants in common) and your partner or spouse is an Australian citizen (not a permanent resident)
- You are purchasing residential property and you are a New Zealand citizen
- You are purchasing residential property and you hold a permanent residency visa
- You are purchasing new dwelling(s) from the developer, where the developer has pre-approval to sell those wellings to foreign persons. Such as an off the plan mortgage.
- You are acquiring an interest in developed commercial property valued below $50 million generally; $5 million for heritage listed properties; or $1005 million for US investors
Going To Auction
This is an important step and to take it you must be aware of how much you can borrow.
Lenders measure this as the percentage value of the purchase price of the property. For example, if you have 20% of the purchase price, plus stamp duty and other fees in savings, you would need to borrow 80%LVR (Loan to Value Ratio). This means you would need to borrow 80% of the purchase price.
Your circumstances, including citizenship or foreigner status as well as income and savings, will affect how much a bank or lender is willing to lend. Risk associated with a mortgage increases dramatically for them once they lend over 80% of the property value.
Here you many need to purchase something called Lenders Mortgage Insurance (LMI). This protects the lender against for the extra value of the loan against you the borrower defaulting on repayments.
What circumstances can affect the %LVR you can borrow?
- Do you have a married or defacto spouse living in Australia?
- Are you classified as a temporary resident (been working in Australia for over twelve months)?
- Can you prove you are careful with money with at least 5% of the loan value in a savings account, shares or a term deposit?
- Are you a medical professional?
Now you are one step closer to bidding at auction. Following the above advice and contacting a mortgage broker you can find out how much you can borrow, where you can purchase and most importantly you can now bid knowing the limits of what you can spend.
This way you will not end up winning an auction then later on having your loans declined or finding out you are unable to borrow the entire amount you need.
Invest in Australian Real Estate Today
To find out about how your circumstances affect your ability to borrow, you should talk to an Australian Mortgage Broker such as the Home Loan Experts. Their advice is free for many loans and they can advise you on your options and deal with many different lenders to find you approval the first time you apply.
Enquire online to find out how you can invest in Australia today.
