How do I qualify for a home loan?
What is required to get a home loan?
? Australian banks have these criteria for home loans and Lenders Mortgage Insurance.
? Your loan may be declined if it falls outside of these requirements.
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ACCEPTABLE BORROWERS:
1?. Aged 18 or above.
2?. A company
3?. A trustee of a trust
UNACCEPTABLE BORROWERS:
1? Clubs or associations
2? Under 18 years old
3? Limited liability companies
WHAT ABOUT NON-RESIDENTS?
?? There are some exceptions. This can be reviewed on a case-by-case basis.
WHAT ABOUT BORROWERS OF CONVENIENCE?
? It's unacceptable to be added to a loan simply to added borrowing power or serviceability.
?Borrowers must have a benefit in the property in terms of ownership or the borrowers are married or defacto.
?? Guarantors are the only exception to this rule.
WHAT ABOUT TRUSTS?
?When the trustee is a company - the directors & shareholders are required to provide unconditional joint and other guarantees.
?The trustee must always be the borrower. This is for family trust, unit trust, and discretionary trusts.
WHAT ABOUT COMPANY BORROWERS?
?Directors & shareholders give unconditional joint and other guarantees.
?? Notional directors are excluded.
NON RESIDENTS:
1. Without permanent residency in Australia.
2. Live or is employed in another country.
EXPATS?
? Are considered residents of Australia by lenders.
? New Zealanders & permanent residents of New Zealand are considered residents of Australia. These can borrow up to 90%
NON-RESIDENTS:
?Can borrow up to 70% of the property value.
?Must be considered high net worth or have assets > $500K
MY WIFE IS FROM NEW ZEALAND?
?This will be assessed as resident of Australia.
?If rental income needs to be considered, & cannot be verified by the lender, the rent must cover 100% of the mortgage repayment.
?This may require written approval from the foreign investment review board.
GUARANTORS:
?The guarantor cannot be a pensioner using their owner occupied home for Family Pledge Home Loans.
?If guarantor is required to service the loan, then standard income and employment verification is needed.
WHEN ARE GENUINE SAVINGS REQUIRED?
1?? Low doc loans - 20% needed.
2?? Investment loans LVR 90% - 10% required.
3?? Home or Investment loans LVR<90% do NOT require genuine savings with some lenders.
4?? Home loan > LVR 90% needs 10% genuine savings.
5?? Investment loan >95% needs 5% genuine savings.
WHAT ARE GENUINE SAVINGS?
?Money saved in First Home Loan savings account.
?Money saved in savings accounts for > 3 months.
? Funds from the sale of property.
? Equity in residential property.
? Term deposits.
? Shares held > 3 months.
? Rental history of 6-12 months.
?Gifts from parents in some cases.
?Credit card top ups on case-by-case basis.
DISINGENUOUS SAVINGS:
?Inheritance
?Sale of car
?First Home Owners Grant
?Fund from personal loans
ACCEPTABLE EMPLOYMENT & INCOME:
?Permanent Salary; Wages (full or Part time), & Contract:
? 12 months with current employer or 2 years in same industry.
? Exceptions to this rule are provided to nurses, doctors, teachers, fire-fighters, police etc
Casual Income:
? 12 months in current job.
? Case-by-case based on the deposit and financial position of borrower.
? 3 month casual is ok for some borrowers with a strong deposit.
Self-Employed:
? More than two years financial statements – except if has 2 years in the same occupation but only operated the business 12 months.
Second Income:
? 12 months in 2nd job.
? Exceptions for nurses, teachers, fire-fighters, police, paramedics, physio, pharmacists etc…
WHAT ABOUT OVER TIME & SHIFT ALLOWANCE?
? Usually assessed at 80% if overtime is regular – must be confirmed in writing or 2 years of statements must be provided.
? Assessed at 100% for teachers, paramedics, police, nurses, doctors etc.
? If Overtime is a condition of employment, then 100% is used.
WHAT ABOUT RENTAL INCOME?
? Usually assessed at 80% & added to salary to support total income.
? For high density apartments this may fall as low as 50%
? Lenders shy away from borrowers who derived the majority of their incomes from rent.
CAN I INCLUDE CHILD SUPPORT AS INCOME?
? Yes in some cases child support is 100% accepted.
? Must be a maintenance agreement registered with the Child Support Agency (CSA).
? Must show six months of consistent payments.
? The payments must be considered permanent for the next five years.
SELF EMPLOYED
? 2 years business or personal tax returns must be supplied.
? Must show consistent income for those 2 years and a positive growth rate.
? If income increased less than 20% over the last 2 years, then the latest years’ income will be used for the assessment.
SUPERANNUATION & FRINGE BENEFITS:
? Extra super payments may be added back to your taxable income for increased borrowing power.
? Fringe benefits & Stipend income is assessed at 80% for most occupations.
? Emergency services such as paramedics, doctors, fire-fighters, police and also teachers are assessed at 100%. This is a real benefit when adding to an investment portfolio.
? Speak to Mortgage Broker Revesby if you’re a teacher, paramedic, fire-fighter or police officer for help accessing these lenders.
WHICH INCOMES WILL NOT BE ACCEPTED?
? Workers compensation
? Rent money from boarders living in your house.
WHAT IS SERVICEABILITY?
Differs among lenders. But there are some common traits:
? Net Disposable Income -
? Can you meet your regular fixed financial repayments?
? How much funds are left over after tax, living expenses & fixed repayments are deducted from the borrowers gross income.
WHAT IS DEBT SERVICE RATIO?
? The percentage of income used to service debt.
? If this is greater than 50% then your home loan will probably be declined.
? Applied with an rate buffer of 2.25% on top of the standard rate to cover interest rate movements.
ADD BACKS:
These are the expenses that are ‘added back’ to your net income for debt serviceability:
? Interest paid on debt being refinanced.
? Business depreciation – must be less than 20% of businesses taxable income.
? Extra superannuation payments.
? Some non-recurring expenses – must be in writing from your accountant.
I LIVE RENT FREE WITH MY PARENTS:
? The lender will apply a weekly notional rent expense of $150 when assessing serviceability.
? Doesn’t apply if purchasing vacant land.
WHAT KIND OF PROPERTY CAN I BUY?
? Property must be readily sale-able to repay lenders quickly.
? Must be in a high demand location, in decent condition, appeal to potential buyers, and have no restrictions on its sale. These restrictions include: caveats, lease of life, covenants, or conditions which state the new buyer must be “approved” by the owners.
PROPERTY REQUIREMENTS:
? Zoned as residential.
? A house, villa, townhouse, unit or vacant land.
? Direct vehicle access.
? More than 50 square metres in living area. This does not include car space or balconies.
? Other security types may be accepted, subject to limitations.
PROPERTY VALUATION:
? Some banks give free property valuations.
? Automated Valuation is accepted under certain criteria.
? Desktop Valuation is usually automated.
? Restricted Access Valuation..
? Short form or full inspection valuation.
? Long form valuation is used for luxury properties.
I'm here if you need me.
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Matthew Stack
www.mortgagebrokerrevesby.com.au
0423 237 242