Difficult finance proposition

I can already picture some of the responses I'm going to get for this post, but figure if I don't ask, I will never find out. So here goes...

I recently found a great little property that I would love to be able to buy - a first home - but my circumstances mean that, on paper, I look like a risky proposition for lenders. The property is in a small town, a bit out of Melbourne, so going for a lot less than something similar nearby would fetch, but also with a heap of potential to add value with some smart renovations (I'm trained in architecture and construction - the ideas are buzzing for what could be done, and how to pull it off)

The catch, though, is that I'm a full time university student, and while I get Austudy and have other income, my finances are up and down. Part of my income is from an extremely small business I run, and some from irregular casual jobs. I have a year to go on my studies. I also have a car loan, which is about 80 per cent paid off and will be cleared in the next 12 months (I have a good amount of equity in the car now, as well), and, thanks to some terrible times about 12 months ago, a bit of credit card debt that I am slowly eroding, without using the cards at all.

I know - I look like the last person who should be taking on a mortgage. That said, I have never yet failed to come up with the cash when a payment falls due, I have a supportive family and no dependents, and in the past three years have managed to pay rent that is substantially higher than the combination of mortgage payments, insurance, and rates. I already pay the same bills, so know I can cover them. The way I see it, I would actually be much better off buying somewhere like this in the longer term, as well as having a little extra cash available in the short term to carry out those basic improvements.

So, my question is, assuming I could scrape together the cash for a reasonable deposit, although likely still a bit less than 20%, are there any lenders that would consider me? Or would I just be too much of a risk?
 
if your small business has an ABN registered for 24 months, you might qualify for a low doc loan. But they are limited to 80% of the properties value.

Other than that im not sure what to recomend apart from perhaps a JV?
 
if your small business has an ABN registered for 24 months, you might qualify for a low doc loan. But they are limited to 80% of the properties value.

Other than that im not sure what to recomend apart from perhaps a JV?

yeah, jv is the other option I was thinking of

or a profit share agreement

is there enough margin to split it two ways>
 
Without having all the details based on what you have posted you are going to struggle as mortgage insured loans are not the easiest with "irregular casual employment"
 
My ABN has been registered for more than 24 months, but the turnover on the business is so minuscule that it barely qualifies as anything more than a hobby, by ATO standards. My most regular cash at the moment comes from the combination of Austudy and casual employment. Are there any lenders that would actually look at Centrelink payments as income? My understanding was that it is frowned upon (although arguably more reliable than any permanent full time job I've had in architecture...).

I'm not familiar with JV in this context. Do you mean getting someone to go in with me?
 
The catch, though, is that I'm a full time university student, and while I get Austudy and have other income, my finances are up and down. Part of my income is from an extremely small business I run, and some from irregular casual jobs. I have a year to go on my studies. I also have a car loan, which is about 80 per cent paid off and will be cleared in the next 12 months (I have a good amount of equity in the car now, as well), and, thanks to some terrible times about 12 months ago, a bit of credit card debt that I am slowly eroding, without using the cards at all.

I know - I look like the last person who should be taking on a mortgage. That said, I have never yet failed to come up with the cash when a payment falls due, I have a supportive family and no dependents, and in the past three years have managed to pay rent that is substantially higher than the combination of mortgage payments, insurance, and rates. I already pay the same bills, so know I can cover them. The way I see it, I would actually be much better off buying somewhere like this in the longer term, as well as having a little extra cash available in the short term to carry out those basic improvements.

It is a very tricky situation. I can see where you're coming from and I know plenty of people who can afford a loan but it are outside traditional income parameters. Unfortunately there is a legal requirement that lenders need to verify your income and affordability. They can't take into account third party help in most cases. At this point in time it's unlikely you'd qualify for a regular home loan.

Tobe's suggestion of a lo doc loan is probably the only way forward for you until you're in more regular employment. There's a few lenders who offer these types of loans but Tobe works with RAMS who has one of the better products in this space. Tobe would be a great person to talk to to get more info about this.
 
JV (Joint Venture) does mean that someone gets into the project with you. There's pros and cons.

Quite a few lenders do accept Centrelink and Casual employment. It comes down to what can be demonstrated as ongoing income. This probably means looking at your current Centrelink entitlements and your PAYG summary you received in July. My experience is that this is likely to be a tricky deal if you need to borrow more than 80%.
 
What's your definition of irregular casual employment? Has it been with the same employer? What sort of $ value are we talking here in a year?
 
What's your definition of irregular casual employment? Has it been with the same employer? What sort of $ value are we talking here in a year?

Regular employers, irregular hours, rates, etc. It's temp work, so while I have a once a month gig with one office, there are others that come and go and the income from this varies wildly depending on anything from the type of temp gig to the time of year (I'm pretty much full time outside of uni semesters). It's all through one agency though, so it is classed as a single employer. It can be anything from a couple of hundred a month to several thousand, depending.

I can understand lenders being uneasy about this as an income source, but it's during the down time from this that I up the ante on the private work through my ABN, so it almost evens out in the end.
 
As it's through a single agency, do you have a standard payslip from this, with information such as YTD?

I wouldn't necessarily rule it out without actually seeing the exact income coming in.
 
Austudy has an income test, so its going to be dificult for someone getting it to have a total income (including austudy) of more than about $25ky.
 
^ Agree, your income "mght" be too low to service the loan. Bank calculates servicing based on
- A higher interest rate, assessment rate of 7.30-8.50% on average
- A standard living expense needs to be included even if oyur living rent free at home or living on bread and water only..( ~$1,200 for singles)
- Take on full liability ( ie car loan/ credit card limit)

I think your issue is not what the bank will accept, it's more "servicing"


Banks are happy to consider
- Centerlink payment ( infact i have written loan for seniors whos retired and ON a centerlink payment only and same goes for students working casually)
- Causal income is ok, they will just use the YTD and average it out ( min employment term applies)


Personally i got my first loan when i was 19 and it was a struggle as well , i was still at uni and working 1 part time job and 1 casual; at the time i was banking with CBA and they said no...spoken to our family broker and she "prepared and planned" my file for the next 6 month as my file couldn't service the loan at that stage..i had to increase my savings and put in extra hours- 6 month later just before my 19th b day i got my 1st IP ( property has more than doubled)- no regrets.
 
Hmm a lot of my friends are in a similar position to you Kylie.

While you may not be able to borrow now, you may like to learn about how you can make your 'file' as strong as possible so that you can borrow sooner rather than later. There are some things people on casual employment can do to strengthen their file before borrowing (consistency, 3 mnth income, etc).

Mick's story about talking to a broker and setting out a plan to get in seems to have worked wonders for him.

As Peter mentioned, perhaps give tobe a call - RAMS are very good in this space.

Also, great getting in early. :)
 
No mention of deposit? Small town, casual income, limited deposit, single borrower under 25. It doesn't sound too promising.

I think your best bet would be a joint ownership and joint loan with a family member with a bit behind them. You can split ownership 80/20 or even 99/1 (some lenders don't allow) but income is assessed jointly regardless of ownership %. Then when your on your feet you can buy their share out and have the loan just in your name.
 
How much is the property? It would need to be pretty low to even consider

In WA we have Keystart loans and Shared Equity Loans run by the govt which is an option to look into if you have them in VIC.
 
Top