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:

1️. Aged 18 or above.

2️. A company

3️. A trustee of a trust

UNACCEPTABLE BORROWERS:

1️ Clubs or associations

2️ Under 18 years old

3️ 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?

1️⃣ Low doc loans - 20% needed.

2️⃣ Investment loans LVR 90% - 10% required.

3️⃣ Home or Investment loans LVR<90% do NOT require genuine savings with some lenders.

4️⃣ Home loan > LVR 90% needs 10% genuine savings.

5️⃣ 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 2^nd 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
matthew@mortgagebrokerrevesby.com.au
www.mortgagebrokerrevesby.com.au
0423 237 242