Prakash Rai used his expertise to navigate costly, complex process
Securing a home loan in Australia when you’re a migrant on a temporary visa sounds like an impossible task.
But Home Loan Experts mortgage broker Prakash Rai (pictured above) has proved it is indeed possible and achievable. After successfully navigating the complex and expensive process of getting a loan on a temporary resident visa, he bought a house in East Gosford in June.
Now Rai is in the perfect position to help customers on temporary visas understand that being granted a loan and buying a house can be accomplished, as he can explain exactly what obstacles they have to overcome.
Rai, who was recognised in MPA’s Rising Stars (Young Guns) in 2019, has been working for Home Loan Experts since 2014. Originally from Nepal, where he worked as one of HLE’s broker support staff in Nepal, Rai rose to team leader.
HLE then selected Rai as part of a pilot program for new mortgage brokers and he was sponsored by the brokerage to move to Australia in February 2018 and continue his broking career here.
“I came here on a temporary skilled worker visa for two years and then the visa regulations changed to a 482 [temporary skill shortage visa], which I renewed in 2020,” Rai said.
His 482 visa expired in February 2022 due to the fact that he received some incorrect advice and he had to move onto a temporary activity 408 visa, which did not provide a pathway to permanent residency.
Rai said he had applied for a 491 skilled work regional visa, requiring him to live in regional NSW for three years. At the end of this period he would be entitled to seek permanent residency.
Purchasing a home
Motivated by the desire to become a permanent resident, Rai decided to buy a property in East Gosford. He said there are other reasons too.
“I was paying almost $2,000 in rent each month,” said Rai.
“When I learned that getting permanent residency through the 491 visa would take five to six years, I started to worry. The thought of paying rent for that duration and seeing property prices rise over the years made me realise that buying now would be a wiser choice.”
Rai said he had helped many clients who wanted to buy a property while on a temporary visa, but these customers were on 491 or 494 skilled employer sponsored regional visas.
However, he had never assisted somebody who, like himself was on a 408 visa, to buy a property or get a home loan approved.
“My visa is a 408 (temporary activity visa), which lenders don’t typically accept, so I knew it would be challenging,” said Rai.
Challenges and high costs
Rai doesn’t shy away from the difficulties and high costs involved in obtaining a home loan on a temporary visa.
Because he isn’t a permanent resident, Rai had to seek and obtain approval from the Foreign Investment Review Board to buy a property. Prior to April 9, 2024, the FIRB application cost $14,000 but Rai had to pay much more when the fee was increased after that date to a whopping $42,800.
Rai also had to pay $72,400 for the foreign buyer surcharge and full stamp duty $35,460, because as a non-permanent resident he was not eligible for the first home buyer stamp duty discount. If it had been applied he would have only been charged $20,860.
Add in the 20% deposit required, and Rai had to pay a total of around $340,000 in for the $905,000 property in East Gosford.
“It was a huge financial commitment … only two lenders agreed to give me a mortgage, and it came with a high interest rate of 7.46% and a large deposit requirement. It was a tough process.”
Rai’s expertise as a broker, knowledge of how banks operate, the ability to demonstrate good income and a path to permanent residency through his awaited 491 visa meant he was able to convince the lender to approve the loan.
While Rai said he realised that if he waited till he was granted permanent residency he wouldn’t have to pay the extra FIRB changes but that could be five or six years away and the cost of the property might have risen to $1.2 million or $1.3 million by then.
“I’d also be missing out on the capital growth as well and it would be more difficult to get into that market at that point in time.”
The FIRB process was also a challenge, said Rai. “The FIRB website stated that the turnaround time was a month, but the instructions were confusing. I am thankful that my case owner was very supportive, contacted me directly, and got my approval in just four days.”
Also if the FIRB denied the application, the $42,000 fee was non-refundable.
Lessons learnt
Rai said he had to figure out the FIRB process himself but now that he had been through it he was able to provide clients some guidance on the process.
He advised temporary residents who are considering buying a property to talk to a broker, consider their financial situation and the timing of their visa application process.
Rai said, for example, that people who were on 491 visas and might only be a year or two from gaining permanent residency could be better off waiting until that was granted before purchasing a property so they could avoid the extra fees.
He said the biggest challenges that he confronted with his own loan and property purchase were conducting a long-term cost-benefit analysis, defining objectives, understanding the type of security, and assessing personal investment experience and plans.
“Being well prepared is essential,” said Rai.
