Question for people on low incomes

[Radicals]

I am a low income earner (<$40K p/a) I have no partner or children.

It will be a little while longer before I can apply for a home loan as I recently started working after studying.

I am still unclear on how much money I will be able to borrow, but I just wanted to get a ball park figure.

I completely understand people will be hesitant to tell me a figure due to personal/privacy reasons.

My question is;

Single people on low incomes (like mine, <$40,000 p/a) how much money were you able to borrow from the banks? I know everyone's situation is different, but I just need a ball park figure. if you don't want to write it here, please PM me.

Thanks!

 

[spludgey]

There are borrowing calculators that will give you an indication of how much you can borrow.

And it also depends on how much of a deposit you have and what the rental return of the IP that you're looking to buy will be. No easy one number answer here.

 

[Jake D]

If I were you, I'd hit up a broker and ask them to calculate it for you. Banks' calculators can be quite generous and not take much of your personal situation into account.

A broker wants to get you a loan, it's how they get paid. So they will be far less likely to quote you a figure that won't actually get approved down the line when you've got an offer on a property.

It doesn't cost anything to call a broker you trust and ask them a bunch of questions. They will ask you a bunch of questions, though, so they can give an accurate answer.

 

[beachy]

A stab in the dark answer - I'd say $200k max. Usually lenders work on around 3-4 times income level with about 75% of rental income but like the other posters have said speak to a broker

 

[D.T.]

I'm on fairly low income too (not that low though!) and it's been tough to borrow so have opted for cheaper properties.

Do you have any other debts, credit cards, etc ?

What kinda savings / deposit do you have? Some lenders will give you a better run at 80% than at 95% for example.

You're the type of candidate that should not have a PPOR. If you can board with others or at worst rent, then your borrowing capacity will go a lot further.

A lot of this will be communicated further with a good broker once you see one.

 

[Corey Batt]

This is definitely a question that you should be getting answered by a broker who can give you specific advice on your exact situation. If you're currently employed there's definitely going to be options available - length of employment policy has been loosening for some time now.

You can certainly start an investment portfolio on 40k/yr, I've helped a lot in similar situations start their investment journey when starting on lower incomes.

 

[Jamie M]

Hiya Radicals

Just get a decent broker to run the numbers for you - there's no shortage of them on SS.

One thing to keep in mind with low income earners living with parents (I don't know if you are or not) is that some lenders will assign a nominal rental expense of circa $650 per month even if you don't pay rent/board to your parents which can hurt your borrowing capacity.

Cheers

Jamie

 

[Lil Skater]

Speak to a broker, they'll be able to give you a good idea. Plenty on SS (Jamie is one...)

This was more than 5 years ago now, but I was on $26k in my first job and had approval up to ~$190k (investment).

What you can borrow will highly depend on individual circumstance, not just kids/no kids, but also any personal debts/credit cards etc.

 

[Radicals]

I'm on fairly low income too (not that low though!) and it's been tough to borrow so have opted for cheaper properties.

Do you have any other debts, credit cards, etc ?

What kinda savings / deposit do you have? Some lenders will give you a better run at 80% than at 95% for example.

You're the type of candidate that should not have a PPOR. If you can board with others or at worst rent, then your borrowing capacity will go a lot further.

A lot of this will be communicated further with a good broker once you see one.

Exactly, I'm not buying a PPOR, I'm buying an IP, a cheap IP for that matter!

 

[skater]

Agree with everything everyone before has said, but it will also depend if it is for PPOR or investment.

 

[Mick C]

I am a low income earner (<$40K p/a) I have no partner or children.

It will be a little while longer before I can apply for a home loan as I recently started working after studying.

I am still unclear on how much money I will be able to borrow, but I just wanted to get a ball park figure.

I completely understand people will be hesitant to tell me a figure due to personal/privacy reasons.

My question is;

Single people on low incomes (like mine, <$40,000 p/a) how much money were you able to borrow from the banks? I know everyone's situation is different, but I just need a ball park figure. if you don't want to write it here, please PM me.

Thanks!

Exactly, I'm not buying a PPOR, I'm buying an IP, a cheap IP for that matter!

Without knowing your financial at alll and the general blah

- No debt
- Single
- Income of $35,000 ( sorry not sure how Low is <40k ...)
- Living rent free at home
- Min 10% deposit
- Buying cheap IP

^ pretty much a typical young first time investor who just graduated / working less than 1-2 years...

Borrowing capacity on $35k income gross before tax will hover around $240,000- $355,000. More towards the $300,000 mark.

Good luck, and don't treat this post as a pre-approval / permission to buy

P.s $35,000 is a pretty low income....im guessing your part time? or causal?


Regards

 

[Scott No Mates]

$35k = $17.50/hr for a 38hr week

 

[wylie]

Five years ago our son was on $38K and borrowed to buy for $292K. I don't recall if we had to lend him a token deposit? I don't think so. His loan was $290K or very close to purchase price, so probably we lent him the stamp duty?

It was from a bank and our broker said (from memory) the fact there was a lease in place (only for several weeks after settlement) that the bank lent him more as it was a rental and threw off income. I am a bit confused by this and why (if) it is true - but if you are going to rent it you may be able to borrow more.

Definitely call a broker though. The online calculators never seem too accurate.

 

[Alex P Keaton]

Wow massive difference in what banks will lend you if it's ppor v ip! I didn't realise!

When I bought my ppor back in 2008 I was on around mid $40,000 and ANZ would only lend me $177 k, but it was sub 50 SQM, they would go up to 80 % lend and mum and dad helped with the rest. At the time I was living with my parents too.

 

[Peter_Tersteeg]

Alex the reason lenders have a significant difference in borrowing capacity in circumstances such as yourself is reasonably straight forward...

When you're living with parents, your cost of living is quite small. You're not paying a mortgage, you're not paying rent. Therefore you have a certain amount of disposable income.

If you purchase a PPOR, some of that disposable income will now need to be used for mortgage repayments. This essentially defines how much you can borrow for this purpose.

If you purchase an IP, you can use that same disposable income for mortgage repayments, plus you can use the rental income you'll receive. You may even get a bit more for the tax deductions the IP might bring in. You can throw a lot more money at a mortgage, thus you can borrow significantly more.

The figures would change again if you're paying rent instead of living with your parents; hence a lot of young people are able to build a modest portfolio quite quickly if they put their minds to it.

How your disposable income is determined varies from one lender to the next based on their lending policies. Different policies mean different figures which leads to different results from one lender to another. This is why some lenders tend to work well for investors and others for different types of lending requirements.

It should also be noted that the online calculators don't fully reflect the lenders policies and therefore are not accurate in all but the most simple of circumstances. These are a marketing tool to get you to contact the lender and should not be relied on at all.

 

[Peterw]

Parents helped me purchase my first PPOR, and yes I have done the same. Not certain if the OP has that option, however I believe all parents would be happy to assist their children get of the "rent" spiral.

Saying that, I do recall one of the economic circuit speakers saying that he prefers to rent than buy. His view was that with the low yields on investment property, he could make more investing etc. Obviously a very disciplined person.

A mortgage kept the money out of my pocket, which I know if it was there, as a 20 something year old, I would have " invested" in a new car ...

Get into property ownership as soon as you can. The advice from the Finance Brokers is spot on.

 

[Alex P Keaton]

Thanks for the explanation Peter. Makes sense.

It worked out well for me buying my first one as a PPOR and at the time being on a low salary as I had an affordable mortgage from the start. A couple of years later my salary went up $10 k. So a $177 k ppor mortgage, nice deposit from mum and dad so that I could buy my $255 k ppor & was able to use the equity not long after to buy an ip.

I'm now renting out my ppor and getting a nice positive cash flow even with Perth rents down! Im living in my ip and the positive cashflow is going towards paying for the mortgage of the place I'm living in at present. I'm even able to save money each month which is great!