How is borrowing power calculated?

[investor_eddie]

Hey guys just wondering if I have any chance of getting a loan for 200k+?

I'm casual on $21ph earning an average of $700pw for 40hrs (saving 400pw minimum)

There is always plenty of overtime and there are times when I am clearing way over 1k\week. Even though my base hours for the week is 32hrs I ALWAYS have overtime doing at least 38-40hrs.

Will the bank only go by my base hourly week of 32hrs even though I never work that little amount of hours? If so, I don't think I can get a loan unless I save up heaps for a big deposit

 

[Rolf Latham]

Hiya Eddie

Most mortgage insurers will look at the base..........

But depends on who the company is you are working for, what sort of letter they give you, how long you have been there, the industry you are in etc .

Then there are the other usual things like, dependants, other debts etc
Obviously a 20 % deposit would help a lot getting around the LMI people.

ta
rolf

 

[investor_eddie]

Thanks for the reply Rolf. I didn't know that mortgage insurers were more strict than banks for lending money but I guess it makes sense. I guess my only option is to save more or convince the boss to make me full time..

Wish I listened to my parents when I was younger and got an apprenticeship lol

 

[Bradsdad]

How long have you been in this job Eddie?

All maybe not losy for you if it's over 2 years and you can demonstrate consistancy of the overtime.


Regards
Steve

 

[investor_eddie]

Hi Bradsdad, I've only been in the job for 6 months but was hoping to buy a IP early next year. I work in security and it is hard to get full time work. I think if I prove myself they will make me full time though. Fingers crossed

Edit: Just one more thing, because it is an IP will the bank take into consideration the potential rental income and increase my borrowing power accordingly?

 

[buzzlightyear]

Edit: Just one more thing, because it is an IP will the bank take into consideration the potential rental income and increase my borrowing power accordingly?

Yep, depending on the bank, they add ~ 75% of the rental income to your total income....

 

[Peter_Tersteeg]

There are lenders who will take your income at 6 months on a part time basis.

As Rolf suggested, your problems will probably come from the mortgage insurers. The purpose of mortgage insurance is to make sure the bank get's their money back if you default - it's there to help the bank not you (that's the simplified version).

As a result, the mortgage insurers tend to be far more conservative than the banks. If you can get a 20% deposit together you'd be able to borrow without LMI and you'll have far more options available to you than if you have a smaller deposit.

As mentioned, the rental income does contribute to the repayments. Different banks have different ways of looking at this, so your borrowing power will vary from one lender to another. The same goes for overtime income.

Find a mortgage broker who you feel comfortable with, they'll be able to perform a comprehensive analysis for you and figure out which lender and which product is most suitable for you. I'd also make sure you get a brokerage agreement document from them which discloses everything it is they're doing for you.

 

[JaneS]

Eddie, the real issue you may have is being employed on a casual basis. Lenders tend to prefer permanent employment rather than casual employment. If you convince your employer to employ you full time but still on a casual basis it will not assist as much as moving to permanent basis, even if it is still part time.
Once you are employed on a permanent basis and have worked through any probationary period it is best to find a finance broker can advise how the different lenders view different categories (eg overtime, allowances etc) of income. Some look at your total earnings over the past couple of years and average them. Some are also more generous in the treatment of rental income than others.

Hope this helps

JaneS