Hello,
My partner has just gone through settlement with her ex husband and is due around $350k. She would like to borrow around $100k to buy an investment property for around $430k which has a rental return of $1999.00 per month.
Using the bank loan calculators the repayments for this would be around $1300 per month which is well below the 80% maximum the banks will allow your repayments to be. So she would have plenty left for rates etc.
However she aproached a mortgage broker who basically said, no job no loan. Is this the usual thing lenders will do? We thought that as long as her repayments are no more than 80% of her rental return that she would be given a loan.
Thanks for the advice
Edit: Just to add the lease has been signed until 2023. So no chance of it being empty anytime soon. What’s up with that? Would it be government leasing it or something?
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This topic was modified 9 years, 3 months ago by
Troy.
A long lease like that is quite likely to be either serviced apartment (avoid at all costs) or Defense Housing Australia, which can be OK if it suits one’s goals. I doubt bank really cares about the length of lease as long as it’s legitimate.
Your mortgage broker sounds correct though. There’s an amount that the banks calculators set aside each month for living expenses, paying existing debts , paying for the new loan (different to what the repayment actually is). They also deduct the rent slightly to allow for rental related expenses. Each bank calculates these things differently (which is why you need a Broker), but still needing an income source (from job or business) is pretty vital.
So a couple of ways of going ahead from here
A) Buy a place outright that doesn’t need a loan
B) Get a job / start a business to have income that can be used for loans
C) Put it in your name as well (I assume you’re employed or have a business).D.T. | DT Property Management
http://www.dtproperty.com.au
Email Me | Phone MeAdelaide Property Management - whole Adelaide metro
So a couple of ways of going ahead from here
A) Buy a place outright that doesn’t need a loan
I’ve tried to convince her to do this. But she was convinced she should borrow and buy a better property.B) Get a job / start a business to have income that can be used for loans
She’s been looking for and applying for jobs for the past 12 months now. Did a phlebotomy course too, But there just isn’t anything around. And she’s almost 50 which doesn’t help.C) Put it in your name as well (I assume you’re employed or have a business).
Im full time employed earning $80k. But that’s where our other problem starts. Her ex husband and his new wife recently had problems after 7 months of marriage and she wanted to take a fair % of his assets as settlement. They sorted things out but now my partner is worried that if things go pear shaped with us I will try and take part of her settlement. We’re not living together both renting seperate houses.
Likewise I don’t want to be paying off a loan for an investment property that’s in her name and if things go south a year later Im responsible for an I vestment property I her name.As DT has said, unless she can show an income to cover the lenders calculations for supporting her own living costs + the investment, she won’t be able to borrow any funds. In reality this will mean having a job of some sort.
A job *itself* isn’t a requirement for lending, just the income – I write plenty of loans for clients who are self funded retirees.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
She gets newstart and child support which covers her living expenses, but why does her income need to cover the investment when the rental returns will more than cover them?
So what are her options then? I suppose to buy a property outright with what she has for her settlement without borrowing any money?
The total income and liabilities are pooled together, to provide a net surplus income. Newstart for the most part is no longer accepted by lenders, and child support only if the child is <13yr’s old.
Ontop of that the Lender then will need to see a minimum living cost per month for the adult (circa $1100 per month – dependent on lender + each child which is $300-400 per month). If she is paying any rent this will also be added into the monthly expenses.
If her income is acceptable to lenders policy, suddenly her surplus income is negative per month, and she won’t be able to borrow.
Realistically buying an investment property with her only cash she has left isn’t going to provide her with the biggest financial benefit moving forward – getting a job will. Once she has an income secured, she can build a portfolio if she wishes and expand from there.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
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This topic was modified 9 years, 3 months ago by
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