How changes to the 457 visa could affect your home loan application
will the elimination of the 457 visa affect your home ownership aspirations?
In April, the Federal Government announced that the 457 visa program which provides visas to skilled migrants would be eliminated by 2018. In its place, the government will instate two new Temporary Skills Shortage (TSS) visas: a two-year short-term visa and four-year medium-term visa.
What do the changes mean?
If you’re a 457 visa holder looking to buy property, the good news is that the changes will not impact you. Current 457 visa holders will continue under existing arrangements, and can apply for permanent residency in accordance with their current visa.
This means if you planned on emigrating to Australia permanently and purchasing property, the changes to the 457 visa should not interfere with those plans.
It is important to note, however, that buying property as a 457 visa holder can be complicated. Lenders vary in their policies regarding 457 visa holders, but you can generally obtain finance if you have a stable job in a profession that’s in demand, if you have a year or more remaining on your visa and if the majority of your savings are in Australia.
You may also need to seek approval from the Foreign Investment Review Board. However, if you plan to apply for permanent residency, you may want to wait to apply for a home loan, as securing finance is significantly easier for permanent residents.
What if I don’t yet have a 457 visa?
If you don’t yet have a 457 visa and are planning to migrate to Australia as a skilled worker, you’ll need to ensure your occupation is on the skilled migration list.
A total of 268 occupations qualify for the two-year visa, while 167 qualify for the four-year visa. This means 216 of the occupations covered under the 457 visa scheme no longer qualify.
The changes also mean it can be tougher to transition to permanent residency. The two-year visa does not include a path to permanent residency, while the four-year visa has a three-year minimum residency requirement before applicants can qualify for permanent residency.
For potential property buyers, this means you may face the same hurdles other foreign buyers face, including the requirement to get approval from the Foreign Investment Review Board.
How to get approval from the Foreign Investment Review Board
If you’re applying for the four-year visa, it’s likely lenders will treat your application the way they would one from a 457 visa holder. However, if you plan on getting permanent residency, it could be worth putting off your property purchase until then.
How much can I borrow on a TSS visa?
If you're on the 4 year visa stream, some lenders will lend you up to 90% of the property's value. However, this is an exception to many lenders' policies, and is likely to be determined on a case-by-case basis.
If you're on the 2 year visa stream, lenders are likely to be more hesitant. However, some lenders are willing to consider lending up to 80% of the value of the property you're looking to buy. Again, this is generally on a case-by-case basis.
There are a few exceptions where lenders can be more lenient. For instance, if your spouse or de facto partner is an Australian citizen or permanent resident, you may be able to borrow up to 95% of a property's value. Likewise, if you're in the medical profession you may be able to borrow more and avoid paying lenders mortgage insurance.
In any case, if you're looking to source finance while on a TSS visa, it's wise to speak to a mortgage broker to help you sort through the process.