No two home loan applications are the same.

Below is a list of scenarios. If you have a scenario that is similar, please call us.

How to maximise borrowing capacity

There can be a large difference as to what different lenders will lend you. On a scenario where the same information is put to twenty different lenders the variance from the maximum borrowing capacity to the least may be over $100,000

There are simple ways to maximise borrowing capacity.

The first is to make sure you decrease any credit card limits, or better still close them down. This is because lenders may use an indicative amount of 3% of the credit limit, irrespective of the actual credit card debt. As an example, for a credit card which as an outstanding balance of only $500, and a credit limit of $20,000 the lender may use an indicative expense of 3% of the limit, ie $600 as a monthly expense. This will dramatically affect your borrowing power.

Secondly, different lenders service other financial institutions debt differently. As an example, you may apply for a loan with bank A, and have a $500 a month car loan with bank B. Some lenders will buffer the car loan up for this debt. Another lender may just service it at the current monthly commitment which is $500. If you have interest only investment debt, this can make a massive difference to your maximum borrowing capacity.

Thirdly, different financial institutions assess rental income from rental properties differently. Some lenders will use 75% of the rental income, some use 80% and another may use 100% of the rental income. Again, this can have a big effect on the maximum borrowing capacity.

At the end of the day, lending is about responsible lending. The above may all affect the maximum you can borrow, however you should only ever borrow an amount you know you can pay back.

If you need any further help please call us.

With an offset account which parties can be on the offset account?

The following is a guide:-

To ensure offset features comply with the ATO requirement,  an Offset

account holder(s) must be the same as the holder(s) of the loan account.

If there is a third party on the offset account, but they are not listed as

the account holder on the loan account, then the offset account is invalid.

The following examples demonstrate the eligibility criteria:
Loan Account
holders           Offset Account holders and eligibility

A & B              A & B     YES, it can be offset
A                    A    YES, it can be offset
A & B              A    YES, it can be offset
A & B              B    YES, it can be offset
A                   A & B    NO, it cannot be offset because “B” is not a party to the

loan account
A & B            A & C    NO, it cannot be offset because “C” is not a party to the

loan account
A & B           A, C, D, B    NO, it cannot be offset because C& D are not the

account holders on the loan account.
E & F            E&F PtY Ltd    No, it cannot be offset, as E&F PTY LTD is not the

account holder

The above is a guide only.

85% No mortgage insurer. Note this is different to 85% No LMI

Customer was buying a new apartment for $645,000 and wanted 85% LVR. Had been submitted it to a bank, but mortgage insurer declined due to lack of comparable sales.

Home Loan at 80% LVR plus $20k secured Visa (which can be drawn at settlement). Home Loan was approved and lender provided a $20k secured Visa card at home loan rates.

There was only a small shortfall for the client to cover.

Purchaser was able to settle on the property on time without paying LMI.

Is it possible to get a home loan while on probation?

Yes!!!

Your bank may have told you, that you have to wait until the probation period is finished before you get a home loan. Most people dont want to have to wait.

It is possible to get a home loan while on probation.

You must be PAYG, and full time employed on a permanent basis.

Here are examples of home loan probation scenarios that may be acceptable:-

1. A client that had worked in the I.T. industry for several years has taken up a new position full time position with another employer two weeks ago.  He has commenced work with the new employer but has been placed on a 6 month probation period.  He has just found a property that he wants to buy. He has 5% genuine savings, 5% gift and wants 90% LVR.  He passes serviceability with his new base wage and property is acceptable.

2. A dental assistant who had been studying for the past few years has just been employed in a full time position in a dental surgery a month ago.  She is on a 6 month probation period and continuity of employment is not evident.  She has found a home she wants to buy, has a 20% gift from her parents and wants an LVR of 80%.  Passes serviceability and property is acceptable.

3. A person who had been previously employed in a casual/part time position, has just accepted a role in a full time permanent position.  They have commenced the new role and have located a home and want the 85% NO LMI home loan, as they have a 15% deposit (either gifted or already held).  Passes serviceability and property is acceptable.

Remember, you must be PAYG, and full time employed on a permanent basis.

Please call us.

How much does a lender use when calculating rental income? 

There are two main ways lenders work out rental income.

Some just use between 70 to 80% of the gross rental figure.

eg Rent per week is $100 per week at 75% would mean $75 is used as the rental income figure. This other 25% is deducted to allow for rents, maintenance etc. Having said that, there is currently one lender at the moment who is allowing 100% of the gross rent in their calculations.

The other method used is rental yields.

The below is a guide only. These figures are not to be used in a calculation, as they are only for illustration purposes. If you would like to know the current yields please call us.

	Previous Rental Yields
Sydney	3.25%	3.25%
Melbourne	2.75%	3.00%
Brisbane	4.00%	4.00%
Adelaide	3.75%	4.00%
Perth	4.00%	4.00%
Canberra	4.50%	4.50%
Hobart	4.25%	5.00%
Darwin	5.00%	4.75%

The above table shows how the rental yields can move around.

The column on the left is the previous rental yield and the column on the right is the new rental yield.

The property yield used in the calculation is periodically updated by the REIA.

Self employed and not able to show two years full financials?

Scenario: Clients purchased a new business in early 2011 and were looking to buy an owner occupied property and only borrow less than 50% of the value.  A major bank declined the home loan application as the applicants couldn’t show two years full financials.

Result: Another lender was able to look at this based on previous owners returns, interim figures and business bank statements. Loan settled within a fortnight from receipt of application at an interest rate near home loan rates.

Different credit policies

Different lenders have different credit policies.

If you have a home loan scenario that falls within one of these categories please call us.

• No more postcode restrictions up to 95% LVR
• No more high density restrictions up to 95% LVR
• No  genuine savings loans available for both owner occ and investment loans under 90%LVR
• Depreciation is now an acceptable add back for self employed applicants
• $0 living expense for servicing purposes  if you are living rent free with family
• Accept up to 3 units on the one title
• Up to $1million loan amount is acceptable to mortgage insure at 95% LVR per application to an aggregate of $2.5 million per borrower
• No minimum employment length policy (probabtion is also acceptable with previous industry experience)

Cash out policy

With the tightening in lending policies many lenders have also tightened their cash out policies.

If you are looking for a loan without all the cash out verification then these loans are still available – cash out with refinance

The below are some examples as to how a lender may treat a cash out.

These are guidelines only.

For Personal Investments, renovations, personal use, motor vehicles, deposit on property and purchase of property.

Examples of acceptable evidence are as follows:

Personal Investment (share purchase):

*      Confirmation of recommendation from Financial Planner that purchase forms part of an investment strategy; or

*      Statutory Declaration from applicants to confirm that they intend to purchase investments such as shares/managed funds and understands the risks associated with this strategy.

Renovations/Home Improvements:

*      Copy of contract or quotes for works to be undertaken; or

*      Detailed list of estimated expenses

Personal Use:

*      Detailed list of use of funds

Motor Vehicle:

*      Copy of contract/order

*      Statutory Declaration from applicants to confirm intention to purchase vehicle by private sale 

Deposit on Property:

*      Confirmation provided via Declaration of Purpose form: or

*      Contract of Sale;

Note: * If cash out is sought for a deposit on a property, it is important to understand how the customer intends to complete the property purchase. Where additional finance will be required to complete the purchase it must be clearly explained how the customer intends to achieve this. The capacity to service this extra commitment must be explained. In addition, it should be noted that all lending criteria must be met before any formal commitment can be made.

Purchase of Property:

*      Contract of Sale; or

*      Statutory Declaration from applicants confirming that they intend to purchase property.

 

Examples:

Scenario 1

• Joseph and Emily – both are PAYG income earners and they wish to utilise the equity in their residential property.
• They have applied for a loan with a limit of $1,000 000 for future investment in property.
• Their statement of position & loan ratios are strong, LVR is 70% and serviceability is evident without any rental incomes.

Action required:

• Has there previously been any cash out in the last 12 months. If so, then seek evidence as per matrix above and if not, there is no requirement to seek further evidence.

Scenario 2

• Matt and Angela are Self employed applicants.
• They are existing customers with good history.
• They seek a loan to purchase an investment property for $500,000 and a further $200,000 cash out to purchase shares
• There was an increase in the past 10 months with cash out $100,000 for same purpose
• LVR 65%
• We have been provided with a Statutory Declaration from applicants confirming they intend to purchase shares/managed funds and understand the risks associated with this strategy

Action required:

• A statutory declaration is sufficient evidence as per matrix above.