“Being lost in Australia gives you a lovely sense of security.” The travel writer Bruce Chatwin’s comment still rings true overall, however no one would say being at a loss for credit options is quite as lovely. It’s no secret that before moving to Australia, it’s essential to get your finances in order.
However, when you really want to start putting some roots down in this country, credit facilities are an inevitable necessity. Whether you’re preparing to make a big investment like buying a house or taking advantage of having an Australian credit card, it’s important to examine your financing options carefully. Unfortunately, expats might not have access to the same options as Australian nationals.
Wait – What’s the problem?
If you’ve been an upstanding citizen (or not-quite citizen) thus far in your time in Australia, it might be surprising to hear that getting a loan is not so easy. There are good reasons for this. Unfortunately, Australian financial institutions can’t see your credit history from banks and similar organisations abroad, so they have less idea how likely you are to pay back what you owe. More recently, there have also been concerns about the prevalence of fraud through the channel of foreign investment. This crackdown lead to one unlucky man losing a $67,000 deposit on a house, as a result of having a British partner.
Gauging a mortgage
Examples like the one above might put you off attempting to buy property at all, but don’t despair just yet. Financial institutions can use other indications of your reliability, and if you have a good profile according to these, then you may still be able to buy property.
One indication is the type of visa you have. Australian lenders prefer individuals with either an interdependency visa or spousal visa, as people with these visas are treated like Australian citizens. However, you can still receive a mortgage with other types of visa like temporary work visas, however you’ll only be able to borrow a smaller proportion of the value of the property.
As with when Australian nationals want to buy a mortgage, your other financial assets will also count towards your likelihood of receiving a home loan. Current income and holdings, existing debts and existing expenses will all count towards your creditworthiness and affect the interest rate you receive.
However, even if you do qualify, you should still expect rates of up to 8% – the Australian dream is costly! It might be better to just wait for Permanent Residency if you’re nearing that time, as you may find it easier to get a loan after achieving that.
A credit card on the cards
Some expats might be fine with debit cards alone. However, for many, looking to get a credit card are a preferable option for advantages such as cash back on purchases, air miles and, of course, that all important credit score. It’s really worth doing the research on this one, as different spending habits could really affect which credit card is right for you, and therefore the value obtained when accessing different credit products.
For instance, it’s best to get a credit card which rewards habitual travel if you fly frequently. Meanwhile, if you know you have a tendency to overspend, don’t rely on the banks to tell you the right thing. The recent investigation into banking, superannuation and finance has found shocking cases like a lady who’s been paying off the same $1000 since the 1990s due to poor advice over credit card debt.
Money, money, money
Expats should take time to familiarise themselves with what is available both in terms of short-term loans like credit cards, and long-term investments, like mortgages. Anyone looking to build a life long-term in Australia, unless their name is Gina Rinehart, will end needing to borrow money at some point.