Best Bank for Investment Income Serviceability?

Discussion in 'Loans & Mortgage Brokers' started by jacquiz, 30th Apr, 2020.

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  1. jacquiz

    jacquiz Member

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    Hi everyone,

    I'm keen to understand which bank has the best serviceability calculations when it comes to investment income (e.g. dividends) for home lending?

    I was very surprised to hear the current policy at one of the major banks, so I'm interested to hear if other banks have a more common-sense approach?

    Thanks in advance! :)
     
  2. Jess Peletier

    Jess Peletier Mortgages, Finance & Property Strategy Aust Wide Business Member

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    How long have you been getting the dividends? Some are definitely better than others in this space.
     
  3. Peter_Tersteeg

    Peter_Tersteeg Well-Known Member Business Member

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    This is a very difficult question to answer. Your serviceability may be affected by numerous factors, not just dividend income. Personal income, bonus, overtime, commissions, rental income, different types of debt, existing loan structure, family structure, spending habits and probably a dozen other things I haven't mentioned can all contribute.

    Dividend income is also a tricky subject at the moment. Many businesses are reducing their dividend income during this crisis, so some lenders are getting a bit cautious about using this income for servicing purposes. A few lenders have stated that they're not counting it at all right now.

    As a result, the 'best' lender for your purposes may be very specific and completely different from the most appropriate for someone else. To figure this out you need to get specific advice. You won't get the right answer for a very general question.
     
  4. jacquiz

    jacquiz Member

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    Since FY2017. Over the years, the dividend income has substantially increased, as the share portfolio has grown. This can be evidenced via tax returns/financials as it's in a Family Trust.
     
  5. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

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    are you the trustee or director of the trustee company?

    I think Westpac used to take 80% but have reduced this to 50% of dividend income recently
     
  6. jacquiz

    jacquiz Member

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    Yep - I understand. I plan to reach out to a broker soon as I'm looking to make a few changes. My primary income is PAYG and I also have rental income, however I'm interested to understand how other banks treat investment income for serviceability as I may need to change my approach.

    It's not going to be very beneficial to use secured debt to buy shares if they are going to calculate the repayments on a LOC, but then not take any of the investment income into account.
     
  7. jacquiz

    jacquiz Member

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    Yes, I am. That's good to know what Westpac is offering. Much better than what CBA is offering at the moment.
     
  8. Lindsay_W

    Lindsay_W Well-Known Member

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    Also worth noting Dividend income for servicing is treated very differently if there is a margin loan involved.
    Do you need the dividend income to be considered to do what you're looking to do? I assume so, hence the question BUT the reason I'm asking is that the lender who treats dividend income most favourably might not be the best overall product for what you want.
     
    Last edited: 30th Apr, 2020
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Is a major lender a neccesity ?

    ta
    rof
     
  10. jacquiz

    jacquiz Member

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    Good point! It's not my primary income at the moment as I have PAYG income and rental income, however it will impact my current investing strategy as I was also using a LOC in conjunction with my own savings to invest in shares/LICs/ETFs to create additional passive income.
     
  11. jacquiz

    jacquiz Member

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    Not necessarily!
     
  12. Blueskies

    Blueskies Well-Known Member

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    I was inquiring about this recently myself with Westpac. Not only did they seem to be not very interestesd in considering historical dividend income, they also informed me that they would treat my equity loans secured by property differently if the purpose was for sharing investing.

    They were saying that if I had used the money to make improvements/debt recycle into an investment property that would provide better serviceability than investing in the share market? I couldn't really understand that, either option would give them no guarantee of security and both would offer me the same tax benefits via interest deductions?
     
  13. jacquiz

    jacquiz Member

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    Wow.... I haven't heard that one before!
     
  14. Lindsay_W

    Lindsay_W Well-Known Member

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    The person that told you this is flat out wrong and likely has zero idea what they're talking about.
     
    beachorbust and Blueskies like this.
  15. jacquiz

    jacquiz Member

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    @Terry_w Hi Terry, just wondering if you received my email last Friday? Thought I'd check as you have 'emails = fixed now' in your signature so I thought it may not have gone through. Thanks!
     
    Terry_w likes this.