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For brokers: impact of employment change on serviceability?

Discussion in 'Property Finance' started by Fortune Favors the Bold, 2nd Dec, 2015.

  1. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Hi folks,

    My partner and I have recently received a pre-approval from ANZ based on our current salaries - mine $45,000 and hers $68,000. She's just been offered, and accepted, a better paying job overseas, bringing in $148,000 annually (potentially completely tax free) - which is more than our current joint income. I am, obviously, planning to move overseas with her, though it's not yet clear whether I'll be able to transfer my existing job there. If I'm not able to then I will seek new work after we move, which I am confident I will get quickly.

    So, my question is this: If she takes this job, I quit my job, we move overseas together, and I am unemployed for some time, will or won't this impact our pre-approval, and if so in what way?

    Again, keep in mind that her new job will pay more than our current combined income, and will likely be tax-free.

    Thanks sincerely,

    FFTB
     
  2. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    One more important detail: all our housing costs overseas will be fully covered by her employer, as will her insurance, which will save us a bundle.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    This is a major change I think your pre-approval will need reapproving. Overseas income will be discounted to factor in exchange rates too, LVRs potentially lowered and your income can't be taken into account if there is none.
     
  4. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Thanks Terry. That makes sense. A few points / questions:

    - She'll still be earning AUD (the contract is with the Australian government). Will her income still be discounted?

    - LVRs lowered - Why would this be the case?

    - Income - If her individually income will be considerably more than our current joint income, wouldn't our serviceability actually increase?
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    She may still be a resident for tax purposes and may be treated as per normal if that is the case.

    But even with a higher income serviceability may decrease because of tax. half each means you end up much more than the same amount of income to one person.
     
  6. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Got it. I wonder if we should buy ASAP before we go, or wait until I've (hopefully) found work there....
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Depends on your serviceability. And you don't want to rush into a property just for the sake of it.
     
  8. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    and can u in good faith sign the


    'no material change" to circumstances piece when converting the conditional to full ?

    congrats on the important stuff - the job and locn change

    ta
    rolf
     
  9. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Non resident lending policy differs vastly from lender to lender. NAB takes 100% of the converted overseas income whereas other lenders may take 80% and even 70% of the converted income. LVR's differ as well whereby CBA will go to 95% LVR for an australian citizen whereas a handful of lenders will go to as little as 70% LVR.
     
  10. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yes - technically you should advise on such changes.....and this isn't a small change!

    Also - ANZ may ask for updated payslips when you actually find a property. At that point - you'll be caught out.

    It doesn't mean you'll automatically be precluded from getting a loan - you'll just have to qualify based on the new situation.

    Cheers

    Jamie
     
  11. Redom

    Redom Mortgage Broker Business Member

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    That change is big - in terms of your pre-approval, you should probably let ANZ know if you take the offer and move. As Jamie mentioned, you may be caught out later in the process.

    In terms of the other effects on you:
    • LVR changes - there are very few players that operate in the mortgage insurance space, CBA are the main one. The insurers don't like foreign income.
    • Serviceability changes - with the majority, you won't be able to include 100% of your partners income. Also you won't be able to include the negative gearing add back on calculators that adds to your income if you have investment properties. NAB are the outlier in terms of strong servicing, they'll take 100% of your income. St George are pretty good too, but will need a higher net surplus to meet serviceability requirements (i.e. you can't just pass, you need to pass comfortably). CBA will only take 80% of the income and they have a reasonably small list of currencies they'll use.
    • Employment policy - It may also take some time before her work is considered for income.
    In summary, its a completely different lending scenario that will most definitely impact your borrowing capacity and lending strategy moving forward.

    Cheers,
    Redom
     
  12. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Thanks so much Terry, Rolf, Shahin, Jamie, and Redom. I really appreciate it.

    One question - does it make any positive difference to the above that my partner's income during our period overseas will be in AUD, paid by the Australian government, likely 100% tax free, and will be greater than our current joint income?
     
  13. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes, will make a big difference
     
  14. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yes! That's a good thing.

    So she's simply working for an aus company abroad? If so - this is pretty straight forward.
     
  15. Fortune Favors the Bold

    Fortune Favors the Bold Well-Known Member

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    Yes - she would be contracted directly to the Australian Department of Foreign Affairs and Trade (DFAT). We believe that she will be considered an Australian resident for tax purposes but her income will be tax exempt because she will be delivering overseas development assistance.