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Getting a mortgage on a pension?

Discussion in 'Property Finance' started by Propagate, 20th Jul, 2015.

  1. Propagate

    Propagate Well-Known Member

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    In a similar vein to C-Mac's pots from earlier today, my partners folks are considering a move & settle in Australia.

    They are currently NZ citizens and receive a full NZ pension.

    Dad is 73 ish Mum is 64 ish

    They have an IP, (mortgaged), in the UK which they are about to sell.

    Mum has a UK commercial property which brings in a small income, there is no mortgage on the CIP and no other debt once the UK IP has sold. The CIP property is not worth enough to affect the Australian pension test on asset value, but the income from it will.

    From what we have been able to gather so far, their NZ pension will transfer to an Australian one but will become means tested to the Australian rules.

    When here in Oz, the income from the UK commercial property will reduce their Australian pension to a degree.

    They won't have much in the way of savings as the profit from the UK house would be used as the deposit for the Australian PPOR, (say 40% deposit).

    Approximate guesstimate figures would be roughly:-

    PPOR - Purchase price - $350-400k
    Deposit from sale of UK property + savings approx - $160k

    Income from UK commercial property (owned outright, no other debts) - approx $25k p/a (in Mums name)
    Income from reduced Australian Pension - approx $25k per year (joint)

    That makes a total joint income of $50k AUD (50% from UK rental income and 50% from AU pension).

    What are their chances of getting a mortgage for the remaining $190-240k? and over how long?

    Cheers.
     
  2. Propagate

    Propagate Well-Known Member

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    Anyone got any info at all?

    Cheers.
     
  3. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I haven't crunched the numbers in detail but it doesn't look promising. Especially not for a PPOR.

    If any bank was willing to lend - they will want to reduce the loan term significantly and their joint income of $50k isn't going to be high enough to support the reduced term on a loan of circa $200k

    Cheers

    Jamie
     
  4. Propagate

    Propagate Well-Known Member

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    Thanks Jamie.
     
  5. Mick C

    Mick C Well-Known Member

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    Done this sort of loan only last week..2 in fact..and the only lenders that will consider Pension income only with LOW asset is Non banks - Ie pepper home loans and liberty etc....

    If your mum have a good asset base in Aus ( ie property/ shares or super) than it be fine with the Big 4.

    1. Need to be able to service a loan on 15 years most likely...maybe 20 if she has a decent amount in super...decent = $100,000.

    2. Looking at the figures ( havn't done a cal yet as need more info) i have a feeling servicing will be very low...doubt she can afford the 200k loan.

    3. Will need 2 years tax returns to prove the commercial income
     
  6. Propagate

    Propagate Well-Known Member

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    Thanks @Mick C

    1 - zero in super

    3 - got returns but all from NZ, they haven't been aus residents for over 10 years.

    Cheers
     
  7. Mick C

    Mick C Well-Known Member

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    Zero in super and zero asset in aus....i hate to give you the bad news..but chance of approval is low.
     
  8. Propagate

    Propagate Well-Known Member

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    I figured that would be the case. Cheers.
     
  9. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    The reason the chance of approval is low probably runs along the lines of unconscionable conduct

    If the loan goes bad it might be everyone else's fault so it's bets to not lend where that risk is prominent

    Ta

    Rolf
     
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    reminds me of a recent case where the opening words of the judgment were:

    “Who would lend more than $840,000 to a couple,
    each of whom was on a disability pension with no prospects of any form
    of employment, with the husband partially
    blind and the wife with a long-term disability when each had nothing to
    offer but the desire to speculate in real estate? "

    Perpetual Trustees Victoria Ltd v Burns [2015] WASC 234

    Lender had to cop it on the chin for this loan due to unconscionable behaviour by the lender.
     
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