Lenders for Share Traders

Hi Everyone,

I'm wondering if anyone knows of a broker or lender who specialises in loan applications for share traders? I would like to use the income I generate from share trading as income for serviceability for an investment property purchase. I am able to show a history of stable/growing income from both capital gains and dividends through lodged tax returns. I understand that dividends are accepted by many lenders but I'm not sure which ones will accept share trading income.

Many thanks.

 

Were you paying tax on this as capital gains or as income?
capital gains are not income under ordinary concepts and won't be taken as income for servicing - except under low doc loans. If you have 2 years tax returns you might have hope, excluding the shares on capital account

I have a loan tip written on this, not sure if I have posted it yet.

 

There's no one that "specialises" in this, but if you show consistent profits on your tax returns then it could be used.

2 years tax returns is needed

 

Certain lenders are definitely better at this than others, as mentioned previously consistency is key, over at least 2 full financial years.

 

I have paid tax as capital gains (I have a mixture of discount and non discount capital gains). My income would be higher if disclosed as regular income as I wouldn't be eligible for the CGT discount. However, I don't think I qualify as a share trader rather than a share investor as I only make 1-2 trades per week on average. I have a full time job so trading shares is supplementary income.

 

That is quite a different scenario to having income only from Share Trading which is what it sounded like in your title and original post.
So why not just use the employment income for serviceability and any income from share trading as additional/supplementary income?
Have you spoken to a broker regarding your borrowing capacity at all to find out if you need the income generated from shares to borrow?

 

If you dont buy to hold thats possibly incorrect and it needn't be your predominant income. One matter many ignore is you could even be BOTH a CGT investor and a share trader. Income producing shares may evidence a income producing outcome with the gain / loss a side effect hence on capital account. However someone who day trades who isnt in it for income and its easier to see as trading for profits so its nota CGT matter. This gets to the heart of old pre-CGT case law and many younger advisers often fail to see that aspect. . Various factors to consider are explained in link below and personal tax advice may help. Its possible you are reporting as CGT when thats not correct or it may be fine. IDK.
Share investing versus share trading

Lender policy may be little different especially since what you ""earn"" (or produce) for the activity is fairly subjective and conditional unlike buying to hold bank shares, ETFs etc for example and lenders may be more inclined to include the income for servicing where it is regular over time. Perhaps some brokers may identify lenders more friendly to the issue ?

 

You are doing it back to front. You use the income from share sales to buy high yielding property , which should support it self any way and not need supplementing from shares. The income from the property and shares can be used to service loans for the shares, I did this 6 months ago bought a 427k property and got a 627k loan by being able to access equity from increased rental income and picking up shares at 9% yields 2 years ago. Already had had 20% + CG on property and can buy better quality shares back at large discount and feasible prices.

 

Yes spoken to 1 broker already. He was confident in obtaining a finance with the share trading income included however after a enquiries across his lending panel no luck unfortunately. I understand how employment income/dividends are treated and am comfortable with this. The key issue is the share trading income - while it's supplementary it's still material and I will need it to be included in the serviceability calculation.

 

I have a portfolio of both long term buy and hold shares for capital growth/dividend income and also a portfolio of short term trading shares (usually hold for a few weeks to a few months). Although I do sometimes move some of the shares from the long term to the short term portfolio and vice versa. My trading frequency isn't too high like a day trader.

 

You would LIKE it to be included. Lenders have their own views. Past activity or ROI income is not necessarily going to repeat or be consistent. I once encountered a taxpayer with a huge CGT gain from a property sale. His lender excluded it from income. He wanted it included. Wasnt going to ever happen. He couldnt repeat it as it had been sold. It was illogical to factor it into servicing income but he kept arguing with his broker. He rang me hoping I would refer a better broker but I agreed with his broker and had to re-explain why last years profit wouldnt be income for a future loan servicing issue.

Had another client sitting on a huge unrealised gain on shares. Lender wouldnt lend against it. He was waiting of the 12mth CGT date. Lenders may not always lend on paper profits as the risk of lost value could occur. They tend to lend up to 80% of some property equity. If income servicing works.

 

Not acceptable income. Irresponsible lending to accept it. Even the best traders / hedge funds make a loss occasionally. Sorry that’s the reality