A mortgage broker just told me I need to get a job if I want to apply for finance….as I am a full time landlord, my only income source is my IPs… While I think it wouldn’t be too hard for me to find employment, I question the banks’ logic in this….I can’t see how any job would provide more security than a healthy property portfolio….anyone else here with similar experience?
Sorry vic, I’m a worker, but my logic is that the Bank will believe that if you have employment, you’ll have double the income that you have now- rents plus wage. Banks have an issue with people being too “rent reliant”, and so want a backup for serviceability.
People like Brenda Irwin, a member of this forum, who have multiple properties, still rely on one wage in the family, to be able to buy more properties. There was an article about her in an API mag a few editions ago.
There are probably some people on here who rely simply on rents and are able to purchase more properties, but I believe many are seling off existing under-performers to buy other properties, so they have the capital base to continue buying.
I am sure others will tell you how it’s possible to keep buying without a job though. Best of luck
kay henry
Hi vicgirl,
I agree with Kay, the banks dont like it if you are too “rent reliant” and need you to earn stable income such as a wage to prove serviciability. Remember rental income is only calculated as something like 70% so if you earn say 100 bucks a week from an investment property the bank views it as you actually earning 70 !!!!
It sounds conservative but thats just how they operate. It covers both your and their butts I suppose!!!
Pepper
Vicgirl,
Talk to a good mortgage broker. Lo-doc loans may be an answer for you.
We’re in a similar situation – income from rents, share portfolio returns & a couple of businesses we own.
Even though one of our businesses is 9 years old, lo-docs are the most effective way for us to borrow mortgage funds.
Cheers,
Aceyducey
In theory, there is no difference between theory and practice. But, in practice, there is.– Jan L.A. van de Snepscheut
As Acey said – a LODOC or even a NODOC may well be the answer for you.
Try different brokers as they often have access to different products.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Thanks for your responses, all advice is really appreciated as I’m only new here in Oz. For example, I don’t know what LODOC means.
As for the logic behind the banks attitude to investors…well, let’s put aside the fact that one of the major reasons people become investors is that they want to be financially secure and independent. I can’t see what’s wrong with 70% of a rental income as there are no upper limits to the amount of rent one can collect.
I’m not saying I won’t be working anymore because I am an active person and in fact am about to apply for a job after I sold my business a few months ago. But as far as jobs go, there are some really fine people losing their jobs every day!
Hi Vicgirl,
Basically a Low Doc/No Doc Loan is a type of finance that doesn’t require proof of income, this type of lending product can be useful for applicants who do not have the required financials that are normally required for a standard loan application.Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Thanks Steven, I’m starting to get the idea. Right now I’m focusing on getting ready for applying for jobs and learning the investment game here.
Hi Vicgirl,
The ‘rent reliant’ attitude of banks was something that was new to me a while ago which was something I never considered (after all, the goal was to have rent’s eventually replacing your income?). Also never be too shy too ask the most ‘simple/stupid or basic’ of questions, as these will be the foundation blocks of your soon to be success!
Cheers,
Gatsby!Yes you are exactly right….my rentcheck is enough for me to give up work altogether but I don’t think I can give up buying properties so this can be a bit paradoxical…anyway, I’m trying to get a job in real estate, you can wish me luck…..
vicgirl
Just think, when you have a job, you can afford double the amount of properties, as you’ll have double the income.kay henry
LOL Kay….I should sell a lot of houses as a landrat to make this equation true, but I’m ever the optimistic….maybe I’ll be selling them to you….hahaha
Right folks, I GOT a job….you guessed, it’s something to do with property…we do get hooked on it, don’t we….I imagine it will be fun as well if I’ll be able to balance it with family commitments….I just don’t know how mortgage brokers or banks treat an estate agent when it comes to loans….
vic,
Congrats :o) It would be salaried, wouldn’t it? Or is it retainer/commission?
kay henry
Congratulations Vicgirl,
now you will be privy to some hot bargains,
like a child in a candy shop.[biggrin]Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Interesting… can anybody fill me in on the deatils of low doc loans..
I have been making a good second income by trading from my PC for the last couple of years. I would like to do this full time but I’m relucatant to quit my boring office job because I am affraid it might mean the end of my borrowing power forever.
What are the criteria for a LO DOC loan ?
Are there higher interest rates ?
What sort of deposit do they require ?What sort of proof of income do they require?
They must want something …
If I was sleeping on a park bench and eating from the garbage and somebody gave me say $50000 could i role up and put it down as my deposit for a low doc loan ?Thanks in advance for any good advice.
Mark
Thanks guys….LOL @ candy shop….however, an agent is usually restricted from buying through their own agency…
Oh, and instead of the “ratrace” I’ll be learning to swim with sharks!
There are many low docs loans out there. Most (but not all) require you to be self employed for at least 2 years, this needs to be proven by the ABN number registration date. Some jsut require a letter from your accountant.
Generally they are only 80% LVR (so you need 20% deposit), But there is at least one that will go to 90%.
Rates start around 7% and go up tp about 11%. Macquarie have one of the best which is 7.30% initially but drops down to 6.5% over 3 years of perfect repayment history.
The only proof they require is a signed declaration of your income. No checks are made to substantiate this income. Some lenders do require proof of rental income but not business income.
Just remember if the income your declare is not high enough to pass serviceability, then the loan will be declined. ie you still must be able to service the loan on your income (declared).
The ATO has threatened to use this declared income as your taxable income, so bear this in mind!!!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Low Doc finance is also available to PAYG applicants,
Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
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