Gifts and Servicing

Discussion in 'Loans & Mortgage Brokers' started by trentcroad, 14th Feb, 2020.

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  1. trentcroad

    trentcroad New Member

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    Hi Guys

    My sister is looking to buy her first investment property but servicing a loan is tight. She's 21 and in her first job, but has a deposit saved.

    At this stage of her life, she still gets $200 per week from our parents to help with her rent. But it's regular and going back all through her university years.

    Current situation is PAYG Income - $55,000 pa.

    My question is, would a lender accept that regular money/gift from a parent in their serviceability calculations?

    Or would there be a way to get that income classified as something they might accept?

    That's obviously $10,400 pa and would help a fair bit given where she's at.

    Appreciate any thoughts.
     
  2. MTR

    MTR Material Girl Premium Member

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    Love your avatar:p
     
  3. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    I doubt it. It is not income
     
  4. Lindsay_W

    Lindsay_W Well-Known Member

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    If it's regular and shown to be consistent it can be considered by some lenders, some will shade it
    I've had lenders accept regular deposits into an applicants bank account shown over 2 years be considered as income and shaded to 80%
     
  5. JohnPropChat

    JohnPropChat Well-Known Member

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    Instead of a gift, can it be income for services rendered? Cleans parents house once a week and does chores around the house.
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I wouldn't outright say no, but I wouldn't be optimistic about it.
     
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  7. trentcroad

    trentcroad New Member

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    Thanks guys

    My feelings were the same as John. Maybe it's best to put it through as income on the tax return and pay tax on it for her services.

    But I guess she would need to wait until the end of the financial year to do that and operate under an ABN?
     
  8. Lindsay_W

    Lindsay_W Well-Known Member

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    This would create more issues than it solves in regard to how lenders would look at ie. it would make it less acceptable.
    Does she NEED this additional income to do what she wants?
     
  9. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    It is is a wage there are super and tax withholding requirements.

    If a business 2 years tax returns needed - generally.
     
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  10. trentcroad

    trentcroad New Member

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    She doesn't need it as such Lindsay, just opens up more options. When you're at that income level every few thousand dollars seems to really add to the borrowing power.

    Many thanks for your thoughts guys. Super helpful.
     
  11. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Similarly when a non working spouse gets a 20 k job

    Supercharges the borrow cap

    ta
    rolf
     
  12. albanga

    albanga Well-Known Member

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    Surely not.
    @Lindsay_W what kind of deposits did you have accepted? Their are endless reasons why deposits from parents could just stop.

    I’m very curious what worked and over what period.

    I would more be leaning towards if they had the cash now then just gift them the full amount as non refundable to reduce the loan to what they can service for the value they need.
     
  13. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker Business Member

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    I think they are talking treating the money as income rather than a deposit.
    A deposit will decrease the amount that needs to be borrowed, but income will increase the amount that could potentially be borrowed.
     
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  14. albanga

    albanga Well-Known Member

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    Yeah I understood that as well.
    Obviously 10k income will increase their capacity a hell of a lot more than what it would take to reduce the loan amount to an equal property value.

    E.g Say they wanted to purchase a property worth 700k.

    Their current max loan on current income is 400k. Meaning they would need to be gifted say 350k (including costs).

    Or if you could make the income work then obviously they would need far less of a deposit which is likely a lot more ideal.

    However I just could not see any lender that would accept this. I mean that’s ridiculously irresponsible lending.
     
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