My husband and I are trying to get a loan of $330,000 to buy a PPOR. My income is $38,000 before tax, and my husband's is $44,000 before tax (as indicated on his group certificate). However, the problem is that the mortgage insurers (we are going for a 100% home loan as we have no deposit) are using my husband's tax return stating his taxable income as $28,000 as his before tax income and can therefore only lend us $295,000.
My husband's taxable income is $16,000 less than his gross before tax income as:
a) he gets the $6000 tax free threshold;
b) he can claim almost $9000 in deductionsTherefore his tax is calculated based on gross income minus these two figures.
We are seeing our accountant this afternoon, but I was wondering if anyone has any advice on how to get documentation to support his gross before tax income over his taxable income? The mortgage insurers think that his deductions are business expenses but they are personal deductions (as most people can claim deductions, only he can claim more due to the nature of his work).
We don't want to use a low doc or no doc home loan either. This is our only hurdle to getting finance and besides seeing the accountant and getting a statement proving his gross before tax income, we don't know what else to try. Any advice is greatly appreciated!
Hi
Everyone (adult residents) gets the $6,000 tax free threshold.
Some lenders, or maybe most, allow certain expenses to be added back to income for serviceability purposes. This can include non cash expenses such as depreciation, certain interest,, and one off expenses. have a look at his deductions and see if any could be added back and then make the case to the lender.
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
You will not get a 100% nodoc or lodoc loan so that is not an issue anyway.
As Terry mentioned each lender has a slightly different interpretation of the income they use for serviceability.
Are you sure that it is the mortgage insurer who has placed this limit on your borrowing because if this is the case you will be immediately limited as to who you can use.
Why not email Terry the details and le t him cast his eye over the deal sure he can reommend someone who wil be able to help.
Richard Taylor | Australia's leading private lender
We are trying to get the loan through Virgin and apparently they are happy with the figures and that it is only stalling at the mortgage insurers.
Saw the accountant yesterday and she said the same thing – that non cash items and one-off expenses can be added back onto the income (which is great because a good chunk of my husbands deductions come from these expenses). We have since sent the new information and are waiting to see how we are assessed.
If we are still having no luck, I would hugely appreciate being pointed in the right direction insofar as lenders with more lenient mortgage insurers goes. We are so close to getting the amount we need – it's just a matter of pushing it over the line.
Thanks so much for the replies!!
Hi,
With the information that you have supplied so far I believe that there is a lender (and insurer) out there that may help. After working with Virgin and the above postings if you still need any help please feel free to email me.
Good Luck and Happy Buying
Sharlene
[email protected]Hi somewhere over there. A good lender will be able to choose which mortgage insurer to direct the loan too – most credit unions are a bit namby pamby with this sort of thing, and the odd bank will be obstinate – it is no secret or magic science like appears to be alluded to here…..there are two mortgage insurers most have access to one is called Genworth, the other PMI. PMI usually are better for higher lends in obscure postcodes-with the coniditon that you have at least 3% of the purchase price in deposit – which you do. As an exception Rams homeloans also have acees to a third mortgage insurer, called prime, and in their case, and in the case of flexible lenders, the loan assessors job is to direct your loan via the mortgage insurance compnay more likely to be successful first time. SOme lenders do there own MI, but this can be more selective as far as postcode restriciton go. If you want an idea of what I am talking about, visit http://www.genworth.com.au/index.htm and click on location guide. THis will give you an idea what I am talking about. Public info, free education………All the best.
"there are two mortgage insurers " Never one to disagree but this is not quiet true.
Apart from Prime there are 2 other main mortgage insurers as well as 3 separate self insured facilities operated by the lenders themselves.
Richard Taylor | Australia's leading private lender
To clarify my previous post "there are 2 other mortgage insurers" in addition to Gemworth, PMI and Prime.
Richard Taylor | Australia's leading private lender
Correct
which is why the four words following my 'there are two mortgage insurers' were 'most have access to'. (as in most lenders/banks) Even then, many seem to only use the one by default unless the loan writer or broker specifies otherwise, unless of course they are the banks that 'do their own MI.' Genworth and PMI certainly enjoy monopoly by default in most cases. A bit more competition when it eventually happens will be welcome by all I reckon.
Well we are still waiting on an answer from the mortgage insurers (who I am sure is GenWorth). We have also looked into using GE money and Wizard Home Loans, but both use GenWorth as their mortgage insurer.
How long does an assessment by the MI normally take? Our papers were sent through to them on Monday and it's now Friday. We are getting really anxious because finance has to be settled by the 25th Sept.
It seems our problem is not what lender we choose to go through (as most will give us the loan) but the MI they send the assessment to. If anyone can help us get this settled in the next three weeks that would be utterly fantastic. I don't know what else to do but wait at this point!
Oh, and we also have a larger deposit now: $7000 FHOG, and at least $5000 savings.
Please help!
It would appear there is something else here as the income alone would service with the mortgage insurers perhaps there are other loan or credit cards causing the loan to not service ?
The joys of being in business for yourself……..with deductions you're damned if you do/damned if you dont. I would sugges at this point contactign a good local broker, laying your cards on the table, (including who you have applied with previosly), explain everything, and let them do some chasing for you. I'm sure you will get close – and it will save you added stress. All the best.
You should try Wizard gievn the options they hold.If the cannot get you a loan they can always act as a broker for you gievn that some lenders use Genworth and PMI and some have an inhouse Mortgage insurer
Cheers !
Hi,
You should give Wizard a go given the options we have! IF your situation does not fit our policy we can always try and qualify your loan with one of our panel lenders.
Wizard use Genworth however there are different lenders who have different loan servicing calculators and some who self insure which we would have access to in the event we cannot get you over the line with Genworth.Cheers
RA
RASomewhereoverthere,
You mentioned the income for last years tax return, but what is the income for the previous year?
You would be required to provide two years tax returns to be eligible for a sole trader loan with tax returns that are suitable for serviceability. It appears that the previous year could be lower than the other. The mortgage insurer will usually go by the lower of the two or average it at best, if you massage the deal with a good relationship and good add backs.
I would personally suggest St George Bank – Flexible Deposit Home Loan. St George are self-insured and provide more flexibiltiy than the majority of lenders offering products under either PMI or Genworth.
Further, their LMI premium to mind is lower than PMI & Genworth.
Regards
Shaun Smith | Managing Director | CDS Financial Services
Direct: +612 9153 0333 |O: 1300 888 366 | F: 1300 732 388 | M: 0419 330 778 | E: [email protected] | W: http://www.cdsfinancial.com.au
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