Refinancing with no income?

Discussion in 'Loans & Mortgage Brokers' started by Lyt, 30th Oct, 2017.

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  1. Lyt

    Lyt Member

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    Hi,

    I currently bought an apartment and have paid the 20% deposit with the rest of my money in an offset account, (about 30% of the total loan). In other words, I've effectively paid off 50% of the loan. I want to refinance at some point in the future. However, I'm thinking of quitting my job and going back to uni in 2019.

    Let's say I refinance after I've quit my job, I might no have any income for a while. How do lender's view this? Will they provide me a loan and let me live off the equity...?

    Or scenario 2. I refinance before I quit my job and don't mention that I have any long term plans of quitting. I'm sure I will be able to refinance in this situation but do lenders periodically check up on your financial situation..? Do borrower's have an obligation to inform lender's of changes in their financial situation?

    Thanks for your help
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    No income

    no loan

    ta
    rolf
     
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  3. Redom

    Redom Mortgage Broker Business Plus Member

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    You don't need your lenders permission to go and study - thats your call. Will be very tough to refi when at uni though, best to plan ahead.
     
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Do it before you quit your job.
     
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  5. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Agreed - no-one is going to refinance you if you can't show income to service the loan. Why do you need to refinance? If you have 30% in the offset, it's a decent cash buffer. If you do need to refi, you'll be paying LMI to get any additional cash out which is not the easiest at the moment. Definitely do it before you leave your job - banks don't check up on you after the loan is funded.
     
  6. Gill Bates

    Gill Bates Well-Known Member

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    If they find out, they could take money from Offset account or not allow you to with draw any $ from Offset account .

    Refinance after quiting job ?
    Wow, I think that is risky.

    You should get a LOC approved now, before your quit job.

    Also if you have a high level of lending or the lender thinks you are "risky",
    they WILL review you financial situation regularly, like once a year .
     
  7. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Lenders need to tick 2 major boxes to comply with responsible lending practices;

    1. Security - you have this in spades at a net 50% LVR

    2. Income to repay debt - this is what you lack so it will be a no go


    As stated above best to do it before you quit your job but bear in mind all applications will ask if your future circumstances are going to change???
     
  8. relentless1

    relentless1 Member

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    I've actually done this before, took out an additional loan then resigned. Many years later not once has the bank called to check on my situation. However as others have mentioned no income or self employed income makes it impossible or highly difficult to borrow again. Also remember some banks want to see that you have been working for a number of years as a requirement for any new loan so plan ahead.

    Think about it this way: As long as the repayments are being made why would the banks bother to call up hundreds of thousands of customers for an update? Not in their best interests basically.
     
  9. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    As long as you fulfill the contractual agreement to make your payments on time you can do what you like as this is all the bank wants at the end of the day.
     
  10. Gill Bates

    Gill Bates Well-Known Member

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    It has been reported that banks have called in loans , even though all payments have been on time. Case was a bit different, it was either business lending or rural lending.
     
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  11. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    Likely to be centered around LVRs?
     
  12. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Must have been a breach of the terms of the agreement. Otherwise Don't think it could happen under a residential loan covered by the NCCP and code of banking practice
     
  13. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Nope.

    Having equity is one thing - being able to access that equity is another. You need to show the bank you can make the repayments.

    Cheers

    Jamie
     

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