All you need to know about Australian mortgages

PropertyGuru Editorial Team
All you need to know about Australian mortgages
In this article, we’ll be comparing these differences to find out in which country is it easier to apply a home loan.
Difference in the housing markets
The housing market in Singapore is basically divided into two: public housing (HDB flats) and private housing (condos and landed property).
In Australia you will only find private housing while public housing is usually provided by the state departments themselves.
How long is the loan term in Australia?
In Singapore the longest loan term is 30 years for public and private housing if you take a loan from the bank.
However if you take a loan from the Housing & Development Board then the longest loan term is 25 years for public housing.
In Australia the longest loan term is 40 years and the average loan term is 30 years.
How much can I borrow?
Loan To Value (LTV) is basically the percentage of the property value that you can borrow. This is called Loan to Value Ratio (LVR) in Australia.
In Singapore the government has restricted the maximum LTV to 80% for private housing which is reduced to 60% if the loan period exceeds 30 years or extends beyond the borrower’s retirement age of 65. Furthermore, if you decide to buy a second home the maximum LTV is restricted to 50% or 30% if the loan period is more than 30 years or extends beyond the borrower’s retirement age of 65.
In Australia there is no such government restriction on your maximum LVR, regardless of how many properties you own – this matter is entirely in the hands of the lender and their mortgage provider.
On your own you can easily borrow up to 95% of the property value as long as you have a clear credit history and are able to meet the lender’s other requirements.
Can people from Singapore buy real estate in Australia?
Singapore citizens who want to buy a property in Australia are limited to borrowing 80% of the property value by Australian banks. However Australian citizens living in Singapore can borrow as much as 95% to invest back home.
The lending guidelines can be a little complex so for more information, please refer to our mortgages for overseas investors page.
Can an Australian bank provide an Approval in Principle?
An Approval in Principle is basically an agreement by the bank which states that they will lend you a specified amount of money based on an assessment of your situation. This agreement is usually given on a conditional basis and may be declined if your situation changes or goes against the terms outlined previously. While this is referred to as an Approval in Principle in Singapore, it is called a pre-approval in Australia.
Getting a pre-approval in Australia can be simpler because some banks can offer a much quicker, computer automated pre-approval. These will need to be assessed again by a person while others will give you a formal approval that has already been assessed and is more reliable.
If you are applying for a home loan in Australia then it would be in your favour to apply for a formal pre-approval.
Is it possible to buy a home without any savings?
You may know by now that in Singapore you have to at least provide 5% in cash (for 80% LTV; 10 per cent cash for 60% LTV) for your home loan. In contrast to this, Australian lenders can allow you to borrow 100% or even more of the property value if you apply for a guarantor home loan. This is where a guarantor – usually your parents or a relative – agrees to put up their property as security for your home loan.
Permanent residents can also apply for a guarantor home loan. Usually the guarantor in question has to be an immediate family member and the property that secures the guarantee must be in Australia. This loan type is not available for foreign investors.
How is stamp duty calculated on Australian properties?
Stamp duty is a tax payable to the state government when you buy a property in Australia.
In Singapore, buyers have to pay stamp duty based on the value of the property, taking 1% of the first $180,000, 2% of the next $180,000 and 3% if the property value is more than $360,000.
Permanent Residents also have to pay an additional fee known as Additional Buyer Stamp Duty (ABSD) which is 5% for their first property and 10% from the second property onwards.
Foreigners, however have to pay ABSD which is 15% for every property they buy.
In Australia stamp duty is calculated in a different way. Here there are several tiers according to the property value which have a certain flat rate and a percentage assigned to it.
Depending on which tier your property value lies, that fee and percentage will apply to it. For example, if you were to purchase a home worth $350,000 then you may have to pay a stamp duty of $8,990 plus 4.5% of $50,000.
Usually stamp duty comes out to 2% to 4% of the property value with more expensive properties having higher stamp duties. The fee and the percentage used to calculate stamp duty also differs from state to state.
While non-residents and temporary residents may need to apply for government approval to purchase property in Australia, they are not required to pay any additional stamp duty.
Are Australia’s property laws nationwide or state-based?
Singapore – being a sovereign city-state / island country – only has one set of property laws controlled by the government. On the other hand, Australia has seven states each with their own laws regarding property purchasing and selling. While the systems are similar in each state, it is still different enough that concessions or costs of buying in a particular state may affect your choice of location.
As you can see, buying a home in Singapore seems harder to do than in Australia due to tighter government regulations. It is also much more expensive for foreigners to invest in Singapore.
Regardless, both countries enjoy a rich real estate market where property is always a strong asset.
Article and images contributed by
Home Loan Experts are an award winning mortgage broking company from Australia that specialises in non resident mortgages and has a strong history of working with Singaporean clients.
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