What is generally acceptable income?

Salary and wages
  • 100% accepted if length of employment criteria is met
  • 50% may be used to assist in serviceability if payment is regular and is a condition of employment
  • 100% may be used where employment is in the Essential Services industry (e.g. Ambulance, Police Service, Nursing, etc.)
Shift allowance
  • 100% may be used only if it is a condition of employment and is an industry standard
Rental income
  • 80% of gross rental income may be added to net salary/wage income (50% of gross rental income accepted for high density and/or inner city apartments. Refer to High Density Apartments Section 5.8.9 for further details).
  • Where a significant portion of a borrower’s income is derived from rental income, and the proposal is heavily reliant on that amount to meet servicing requirements, the application may be considered too rent reliant
  • Level of gross rental accepted for servicing should not exceed:
    » 40% of gross salary or wage income for incomes less than $60,000
    » 65% for incomes greater than $60,000 and less than $100,000 and
    » 70% for incomes greater than $100,000
Investment income (interest, dividends)
  • 80% of income as demonstrated in tax returns – income level must be evidenced over the past 2 years
Social Security benefits/Government Pension
  • 100% accepted where it is considered permanent for the next five years (unemployment benefit/sickness benefits are not acceptable)
Car allowance
  • 100% may be added to gross taxable income
Fully maintained company car
  • $5,000 p.a. may be added to gross taxable income
Child Support/child maintenance
  • 100% accepted if the maintenance agreement is registered with the Child Support Agency
  • Six months consistent payments can be evidenced via the borrower’s bank account statements and…
  • It is considered permanent for the next five years
  • Borrowers must produce the last 2 years business and personal tax returns.  Income evidence must demonstrate consistent income levels for the years under review, however, it would not be unrealistic for each year to reflect an increase up to 20% in the net profit.  Where taxable income has increased over the last two years by less than or equal to 20%, then the latest year’s income is to be used.  Where taxable income has increased over the last two years by more than 20%, then maximum of 120% of the previous year’s income must be used.

How often can I make repayments on my home loan?

Most lenders these days offer flexible regular repayment plans. You can choose to pay weekly, fortnightly, twice monthly or monthly. The repayment can therefore be matched to your pay cycle.

What is settlement?

Settlement is the completion of the sale, when the borrower takes possession of the property and the mortgage takes effect. Settlement usually takes place 4 weeks from the date the home loan is formally approved.

What are the Standard Documents Required when applying for a home Loan?

In conjunction with the submission of your official home loan application you may need to provide supporting documentation that confirms your identity and substantiates your income. Documents can include:

  • Drivers License
  • Birth Certificate / Passport
  • Recent payslips
  • Tax returns
  • Bank statements
  • Rates notices (if you own existing property)

Our Accredited Mortgage Consultants will be better able to provide an accurate overview of what is required for your individual situation.

What is lenders mortgage insurance (LMI)?

Contrary to what many borrowers may think, Lenders Mortgage Insurance (LMI) does not protect the borrower should they be unable to make mortgage repayments. Instead, LMI protects the lender from any losses resulting in the sale of a property due to default by the borrower. LMI premiums are payable by the borrower when the amount borrowed is above a certain percentage, usually 80% of the lender’s valuation of the property. Some lenders will allow you to add the LMI premium (capitalisation) to your home loan whilst others require you to pay it up-front.

What other fees and charges can I expect?

As a rough guide it is recommended that you budget 5 – 7% of the purchase price, on top of your deposit, to cover fees and charges. These fees and charges may include, but are not limited to:

  • Building/Pest Inspection
  • Valuation Fees
  • Lenders Mortgage Insurance(LMI)
  • Solicitor Fees
  • Insurances
  • Connection Fees – phone/gas/electricity
  • Removalist Fees
  • Rates

What is LVR?

LVR stands for Loan to Value Ratio. It is the ratio of the Loan Amount to the Purchase price or Valuation Price. For example, if your new property has been valued at $100,000 and you are borrowing $75,000 then the LVR is 75,000/100,000 which is 75%.

What is Genuine Savings?

Lenders like to see a borrowers’ history of savings – normally the minimum is 3% for first home buyers or 5% for others of property value and they like to see this saved over a minimum of 3 months.

Funds to be held in the borrowers name and include:

  • Funds held or accumulated in savings accounts for 3 months or more
  • Term deposits held for 3 months or more
  • Shares held for no less than the last 3 months

Exclusions from genuine savings:

  1. Advances on wages/commission from an employer
  2. Inheritance
  3. Financing of a deposit
  4. Builder discount/finance
  5. Vendor discount/finance
  6. Proceeds from sale of motor vehicles
  7. Windfall gains
  8. One-off government payments (e.g. baby bonus, stimulus package payments)

If genuine savings cannot be demonstrated as per the above, the LVR must be less than 90% + lenders mortgage insurance.

How much can I borrow?

Because different lenders have different criteria for borrowing capacity there is no standard formula. By filling out our inquiry form and submitting it we can manually work with you to find the lender that meets your loan requirements. We will consider income from a variety of sources including Salary, Self Employed Earnings, Dividends, Rental Income and any other source of regular and recurring income.