Hypothetical

Discussion in 'Property Finance' started by qak, 21st Nov, 2018.

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  1. qak

    qak Well-Known Member

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    If we wanted to borrow for another IP, while I'm not employed (will be self employed), would we be able to borrow say $1.5m?

    We have other assets including properties, cash & shares(plus super which my partner could access as a pension if really desperate). Could fund the purchase from cash/investments but for tax reasons prefer to borrow rather than sell down assets. Existing IP mortgage is fully offset and is about 6% of assets excl super - happy to CC the same property for new mortgage. Partner is employed and his after tax income would cover the repayments (P&I) and we have rental income, dividend and interest investment income, his small business & my small business income.

    We have more than adequate security I'm just not clear how *my* employment status would affect our borrowing capacity?
     
  2. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Hiya

    Security/cash, etc is one aspect. Servicing is another.

    You'll need to demonstrate you can afford the loan. If you're s/e then you'll likely need to provide 2 years of business/individual returns to determine your borrowing capacity.

    Cheers

    Jamie
     
  3. Lindsay_W

    Lindsay_W Well-Known Member

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    I'd say it would affect your borrowing capacity negatively, expect $0 to be used for your income unless you can show 2 years ABN registration and at least 12 months self employed income (some lenders need minimum 2 years of income).
    I'm assuming you haven't begun working for yourself as you mention you are 'going' to be self employed.
    Really cannot say if you would/would not be able to borrow $1.5 Million without knowing all the important figures, existing debts, incomes, age etc. etc.
    I suggest speaking to a broker to work out your borrowing capacity.
     
  4. Redom

    Redom Finance Strategist Business Plus Member

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    Possibly, if you need to use the S/E income, likely solution is with low doc funding and short term ABN lenders. Higher rate and fees, even with large deposits. The more risky, the higher the price. New ABN with little evidencing capacity of income will be circa double standard rate/cost.
     
  5. Lindsay_W

    Lindsay_W Well-Known Member

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    Surely even lo doc would require some income evidence from the new self employed venture, min 3 months or ?
    Or are there lenders that will do lo doc with no proof of income?
     
  6. tobe

    tobe Well-Known Member

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    Their accountants declaration, business income bank statements for 3 months or bas statements are the usual types of verification relied on by Lo doc lenders. A couple of the non confirmers cater for newly self employed by basing calculations on their previous role. The thinking is they can always return to being a payg baker if the candle stick making doesn’t work out.
     
  7. Lindsay_W

    Lindsay_W Well-Known Member

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    Yeah I thought at least have to show something, 3 months worth makes sense. Brand new with no income to show- lenders will lend on that? I've never heard of that before
     
  8. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    Depends what you mean by 'we'.

    If the NCCP doesn't apply you could borrow more easily.
     
  9. qak

    qak Well-Known Member

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    "We" are individuals - a married couple, so I think are caught by NCCP.

    I'll have to have a look at what our annual income is likely to be - we've both changed jobs and I've inherited from both parents so our situation is markedly different to a year or even 6 months ago.

    Can I assume investment income (interest, dividends, distributions) is OK for capacity to repay? I gather there is likely to be a % reduction applied, what sort of discount would be used?

    Can a potential super pension (TRIS) be used in servicing - hasn't been commenced but condition of release for it (age) has been met so it would be a matter of filling in forms for the industry fund to start paying it.

    Each of our properties was funded by loan from our family trust, so we pay interest to the family trust but the family trust then distributes net income back out to us, and this shows in our tax returns. Would a loan be assessed on the full in/out, or the full out (interest expense) and a reduction on the distribution income?

    ETA: I'd probably just leave out my own self-employment at this stage, apart from what's in my tax return which is minor.
     
  10. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    Depending on the lender dividends can be taken into account - generally only exisitng ones, but the income will be given a haircut

    a potential pension couldn't be used i think, but an actual one that has commenced could.

    If you have a loan from a trust you control this is still a debt which will be assets, but they may disregard it if you are in control.
     
  11. Mortgage Capital Australia

    Mortgage Capital Australia Mortgage Broker & Private Lender Business Member

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    If the borrowing entity is a Pty Ltd Company or if in your personal names and the term of loan is less than 2 months NCCP does not apply so a Nodoc loan would be doable.

    Course isn't going to be cheap but could be a stepping stone towards a lodoc non-conforming lender.

    Cheers


    Yours in Finance