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Forms of income used by banks in serviceability calculations

Discussion in 'Property Finance' started by Hosko, 9th Nov, 2015.

  1. Hosko

    Hosko Active Member

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    Hi,
    What forms of income outside salary, wages and rent are banks willing to use in their serviceability calculations. We have been doing some trading on the share market, and the numbers look ok for the last 6 months. Wondering if we can use this with some banks.

    Thanks
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Generally have to show a couple of years tax returns for it to be considered.
     
  3. Hosko

    Hosko Active Member

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    Thanks Jamie. Thought it may be something along these lines. I'm just looking to take advantage of the good times because I know the results aren't always like this!
     
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Are you relying on the income then when in the not so good times ?

    ta
    rolf
     
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  5. melbournian

    melbournian Well-Known Member

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    Does short term rentals (like 1 week, 1 month) still account for income as being accepted for servicability?
     
  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Yes they do but because the income is more irregular you'll usually need 2 yrs returns to show some kind of consistency.
     
  7. Redom

    Redom Mortgage Broker Business Member

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    Can include dividends from shares/managed with some lenders quicker than 2 years (pretty sure CBA/ANZ will consider in shorter time periods, but others like NAB will require tax return history) - but if your looking to include the capital gains from trading, that will generally require 2 years before taken into consideration.
     
  8. melbournian

    melbournian Well-Known Member

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    Would an appraisal from an agent (say someone who specializes in these form of short term leases) be sufficient (saying this place (address) has a rental of $3000 per month
     
  9. Scott No Mates

    Scott No Mates Well-Known Member

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    Only if you are achieving $x each month - the agent doesn’t control how often you accept bookings
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    No, because without a history this kind of property is usually seasonal and might be vacant 6 months of the year. The tax returns are required to show the consistency of the income.
     
  11. Excalibur1

    Excalibur1 Well-Known Member

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    @ eveyone
    Considering short term rentals.... lets assume you set them up in a company and pay yourself a salary (which can equal the profit). Then you only need to show last two payslips? Is this correct?
     
  12. Redom

    Redom Mortgage Broker Business Member

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    Also need to show two years history for that company to use that income (if your the director and related to it).

    Cant become self employed and pay yourself a salary and use that for servicing. Most lenders will only include salary/profit after two years essentially. Can do shorter with different types of financing of course (low doc).
     
  13. Excalibur1

    Excalibur1 Well-Known Member

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    Lets say I put myself as director of the company and my wife is an employee... I pay her a salary just like any other company. The banks wont b looking at the company but at the employee as long as she passes the probation (only if she is good enough hehe) ?
     
  14. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    typically, lenders are pretty good at picking out directors that are related to the employee and will usually treat the whole thing as self employed

    ta
    rolf
     
  15. Excalibur1

    Excalibur1 Well-Known Member

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    Thanks for clarifying that @Rolf Latham . I can still see ways around it... It should be very easy to separate that link.
     
  16. tobe

    tobe Well-Known Member

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    Great try though.
     
  17. Excalibur1

    Excalibur1 Well-Known Member

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    its good to know there are options.... but then again, people shouldn't take on more debt than they can handle. I always say have a years worth of all expenses stashed away in case of emergency!
    I think someone else (cant remember who) was talking about annuities for this too...
     
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  18. melbournian

    melbournian Well-Known Member

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    yeah but let's say the agent manages the whole process (end to end) like a company called hostkeep.
    - HostKeep Property Management

    i'm just there to get statements.
     
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  19. Hosko

    Hosko Active Member

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    No, not relying on the income. Mrs Hosko is going to add a further day mid next year in a gradual return from mat leave.
    I'm very comfortable that we can handle the repayments even at an additional few percent
     
  20. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    If one persons income alone is going to be enough to service the debt then you don't need to try find elaborate ways to work the system. If you need both incomes to service and one isn't real, then you probably shouldn't be borrowing the money.

    As Rolf indicated the banks usually find out when you're trying to be creative. If you're trying to be creative unnecessarily you run the risk of having the loan knocked back even if you could have qualified legitimately.

    It actually takes quite a bit of effort and commitment to make someone look as they're employed. There's more going on than a simple payslip in a word document.
     
    Last edited: 10th Nov, 2015
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