Need Broker Advice

Honestly these comments are a bit of a concern for a lot of reasons. As Marty says, common sense would be for people to realise they want to have children and they'll have the foresight to understand that their borrowing capacity will reduce when this occurs. I don't think I've ever seen someone loose a property because they've had kids, but it's only prudent to plan for it. With a lot of young couples we model their borrowing capacity on a single income so they can have the peace of mind that they can keep their house as things change.

What does really concern me is that these statements suggest that people are trying to maximise their borrowing capacity to extreme levels. If you need to squeeze every last penny out of a lender early in your investment journey, you're setting yourself up for problems which could set you a long way back. Borrowing right up to your affordability limits on properties 1-3 is not a prudent borrowing strategy IMO, you need to have a bit in reserve, or some sort of risk management strategy available.

Seems to me that very few people plan to have child number 3, my observation is that it's usually unexpected. I know families with 5 kids that intended to stop at 2 (she told him to get the snip after number 3, he did after number 4 and it didn't work). Imagine if they were doing their affordability numbers down to the penny for 2 kids! Additionally rates are at their lowest ever right now. If you're not factoring in allowances for a increase you probably need to rethink your decisions.

Long term these things have a habit of sorting themselves out but this takes time. Buffers need to be in place to see people through the short term.

The conversation shouldn't be around the specifics of how many kids you'll have and how that reduces your borrowing capacity. It needs to be about what's reasonably affordable, understanding what sacrifices you're willing to make (and those you might not be willing to make) and making decisions which apply prudent risk management.

 

Hi Everyone,
We have been told that we can't get our loan for $80,000 equity release as we eared $110,000 this financial year but we have payed parental leave in that figure and we don't meat the banks criteria ?
Is this right ?
As we pay more per week of our morgage then what we need to with the $80,000 added on.
What is the criteria ?

 

Which bank? Whats the LVR?

 

We are with NAB
Our home is worth $675,000
We owe only $181,000

 

It would pay to have a chat about your specifics with a broker - unless we know all the details of your financial situation it's really hard to know what NAB may have had an aversion to.

At a guess though, without the parenting payments and the addition of a wife and kid/s you may not service the extra debt, particularly if you have any other loans, credit cards etc.

 

NAB is ok when it comes to parental leave - did you go through a broker or NAB direct?

When is the person going back to work? Have you provided any documentation to the bank that the person is returning to work?

 

Yep - one of my go to lenders for this scenario. Nab broker are generally cool with it - not too sure about red star.

ANZ are another option in this space.

Cheers

Jamie

 

And in here lies anothe great example of the benefit of IO and keeping the additional payments you have made in the offset.

 

Jess we have no credit cards, personal loans etcetc. Our details are at the start of this thread. Of our $110,000 income $11,000 is paid parental leave. We have been advised that because of the parental leave we don't qualify. Wife is back at running her home business. Does this sound right to you guys?

 

No, it doesn't sound right. My guess is that your wife's self employed income may be an issue in some form but not sure why - how long has she worked for herself? What does she earn? Any major discrepancy from one year to the other?

The way the income is split makes a difference too - if you earn the majority it will be worse than if it's 50/50 as tax is higher etc.

Do you get any FTB? A lot of people forget to include that in income and it can make quite a difference.

Having a look at her tax returns, PL and your payslips might also give us some clues - there's only so much we can figure out via a public forum.

 

I have a feeling its the banker that's saying no...not the credit assessors ie the decision makers...

From the figures and LVR your giving it's a sure yes.
Unless you left some "importnat" details out" ( might not be important to you ...but important from a credit point of view ie Over 65 etc... or after a huge equity amount etc.. have other debt /IP? )