Loan servicing without work

[Dylan33]

Would a bank except a low earner or an unemployed person as too much of a risk even though they were to offer a large cash deposit on a mortgage and have a positive cash flow regarding income from the property?

 

[D.T.]

It's all about the monthly incomes (work, business, centerlink, dividends, rents, etc) vs monthly expenses (repayments on debts, living expenses, etc)

They all calculate it differently, but if former is greater than the latter, you're generally in.

 

[Corey Batt]

All borrowers still need to show they can cover their respective borrowing costs, existing liabilities and living expenses (~$1100 per month + rent/mortgage else living at parents).

 

[albanga]

Positive cashflow from the property itself? Another property or other properties?
If one of the first two then I would say almost certainly no, but possible with the last option, depends on how much the portfolio is generating in cashflow.

 

[albanga]

I did have one question though, very hypothetical but if you had a single resi property unencumbered renting for $1500 a week say and it was your only income.

Could you get a loan based on this? Or would a lender see a single property as too much risk?

 

[Corey Batt]

Yes definitely possible, some won't want this in LMI territory, or like at least some explanation of mitigating factors (strong cash buffer etc)

 

[Marty McDonald]

I was thinking about this today. To be successful generally you need income and capital. Lots of folks seem to have one and not the other which is surprising in itself

 

[Colin Rice]

I did have one question though, very hypothetical but if you had a single resi property unencumbered renting for $1500 a week say and it was your only income.

Could you get a loan based on this? Or would a lender see a single property as too much risk?

As long as it ticks the box in the bank serviceability calculator then its possible.

 

[Colin Rice]

Would a bank except a low earner or an unemployed person as too much of a risk even though they were to offer a large cash deposit on a mortgage and have a positive cash flow regarding income from the property?

Yes its possible.

I recently got a loan approved for a client who was on a disability pension (not permanent but long term) and had an unencumbered rental property and a 60k cash buffer.

Property was an IP for his daughter to live in. Took a bit of pushing from my end but a great result for all involved in the end.

Its an amazing environment we have in this country when someone on government benefits and with the right variables can control two investment properties.

 

[Rolf Latham]

As long as it ticks the box in the bank serviceability calculator then its possible.

and the brokers NCCP assessment too of course

I get a bunch of deals that work on HPI, but no where close in the clients real world, which is why I have learnt to tell people that I cant do it, but its not impossible, and someone else may be able to because they assess their outgoings as more discretionary than me


ta
rolf

 

[Mick C]

Yes you can...as long as you pass the banks servicing ( min living expense ...even if your living rent free at home).

 

[Peter_Tersteeg]

I did have one question though, very hypothetical but if you had a single resi property unencumbered renting for $1500 a week say and it was your only income.

Could you get a loan based on this? Or would a lender see a single property as too much risk?

In theory you could get a loan on this, practically it would be difficult.

Lenders will take 80% of the rental income for affordability purposes, so the $1500 gets assessed as $1200. This is only a few dollars more than the minimum 'cost of living' expenses most lenders will use. This brings the serviceability balance sheet to break even.

Lenders then assess 80% of the rental income of the new property as income and the cost of ownership is about 7% in a P&I basis (under lender policy). As a result you'd need a rental yield of about 12% on the loan required against the new property.

Properties like this aren't easy to find these days. This also assumes you have no other debt at all and you have no accommodation related expenses.


One way you could do it which may be more practical...

Buy a high yielding commercial property with a large deposit. There are some lenders that will lend purely based on the rental income if it services the debt.

 

[Colin Rice]

and the brokers NCCP assessment too of course

I get a bunch of deals that work on HPI, but no where close in the clients real world, which is why I have learnt to tell people that I cant do it, but its not impossible, and someone else may be able to because they assess their outgoings as more discretionary than me


ta
rolf

I hear ya. In the case above he was definitley with in his means as he lived with his mum rent free and had managed to save a decent amount of $$$ on a pension as well as pay off a property.