Does capital gains qualify as income for a full-doc loan?

[kank]

Since March 2004, My wife and I have had an income derived completely from share investments. Our income has consisted of about 75% capital gains, 10% dividends and 15% bank interest. Within the last few months we have sold all the shares, purchased a PPOR (we previously rented) and are now looking to secure a loan against the house to buy back into shares.

My question is whether our income, being 75% capital gains, would be seen as legitimate income, and qualify us for a full-doc loan with a bank. I would prefer to steer clear of securitised loans at the moment.

Thanks in advance for any advice.

 

[Rolf Latham]

Hiya Kank

It depends

Are u a trader or an investor ............

If the loan to value ratio is below 80 % then I reckon youd have a reasonable shot if you an show you bought growth stock rather than dividend stock............so in fact you are converting growth to income.

ta
rolf

 

[Pushka]

As capital gains is recorded as Assessable Income on your Taxation Assessment, then it should be - our lender looked at the Assessment and considered it as income, regardless of the source.

 

[Rolf Latham]

Hiya Pushka

Assessable with many lenders doesnt mean much

Although you pay tax on various forms of income many lenders look at cap gains as "extraordinary" income, in other words, hey you was lucky and I reckon u cant repeat that

ta
rolf

 

[kank]

Wow, thanks for the helpful & quick replies.

Rolf: I'm primarily an investor, investing in midcap stocks with reasonably low turnover (though not strictly buy & hold either). LVR would be around 75%.

Pushka: Assessable income is lower than our actual income though, due to CGT discounts & dividend franking. Still, I'd love to know who your lender was if you'd like to share

I assume that if I fail to qualify for full-doc, that lender will not then accept an application for low-doc

 

[Rolf Latham]

Hiya Kank

Thats right , the same lender wont like that at all

Why not chase down an independent broker to run the scenario past a number of lenders, thence saving yourself the chase and possibly wasted time

ta
rolf

 

[feihong]

Wow, thanks for the helpful & quick replies.

Rolf: I'm primarily an investor, investing in midcap stocks with reasonably low turnover (though not strictly buy & hold either). LVR would be around 75%.

Pushka: Assessable income is lower than our actual income though, due to CGT discounts & dividend franking. Still, I'd love to know who your lender was if you'd like to share

I assume that if I fail to qualify for full-doc, that lender will not then accept an application for low-doc

Hi Kank,

To the best of my knowledge, lenders don't look favourably upon CG from investor's point of view, because to them, it is not consistent or secure enough to guarantee consistent repayment of loan (an essential criteria for full-doc). If you have registered for ABN and you then become a trader, then your capital growth will be treated as a proper income for your business, which will get you across the line with lo-doc loan.

 

[kank]

This a bit scary

If you have registered for ABN and you then become a trader, then your capital growth will be treated as a proper income for your business, which will get you across the line with lo-doc loan.

I don't have an ABN

I might just follow Rolf's advice and approach a good broker. In truth, I had kind of already made that decision, but I was curious what you all thought. Thanks