Total Debt vs Total Salaries lending criteria

[dan75]

Our recent request for finance here in Denmark has been declined due to the following reason:

Total Debt/Total Salaries must be ≤ 4

Ours was about 5.75

That's fine. We'll just keep renting here for now, but can anyone tell me if, based on this criteria alone: would we have the same problem getting finance in Australia when we decide to move back home?

Thanks in advance.

 

[Aaron_C]

We use very different criteria here. The ratio of income to debt is irrelevant, what is relevant is the Debt Servicing Ratio (DSR) after taking into account rental income and taxes.

 

[dan75]

Thanks Aaron. I thought as much. As you can imagine, banks are very nervous to lend money over here.

It would have been nice to get something here - interest on PPOR is tax deductible. Oh well.

 

[Rolf Latham]

Our recent request for finance here in Denmark has been declined due to the following reason:

Total Debt/Total Salaries must be ≤ 4

Ours was about 5.75

That's fine. We'll just keep renting here for now, but can anyone tell me if, based on this criteria alone: would we have the same problem getting finance in Australia when we decide to move back home?

Thanks in advance.

Hiya

what thye are saying is they want a DSR of 25 % or less.

Dont assume though that all danish lenders have the same risk profile and have a fish around. I know that in Germany for eg, lenders have a wide variety of criteria just like in oz

ta
rolf

 

[dan75]

Thanks Rolf. We haven't given up yet (despite the tone of my post). This is the second lender to close the door on us. The first one just said we had too much debt and that we needed to sell 2 of our properties in Australia (thanks, but no, thanks). The second one gave us the above ratio as the reason.

We are going to make a few more enquiries before we throw the towel.

 

[Aaron_C]

Why did you tell them that you have debt/assets in Australia? How would they have known?

 

[dan75]

We told SKAT (the equivalent of the ATO) because we can still get the advantage of negative gearing with our properties in Australia. As a result, we have considerable extra money in our pockets here in Denmark each month. As you probably know, the Scandinavians love their heavily taxed welfare state system.

 

[mattnz]

I bet that the Danes walked away from your meeting thinking... crazy Aussie, why does he want to lose money every month, just to reduce his tax bill.

Historically Australia was in line with what you are experiencing in Denmark and most of the world is much closer to their approach these days. Australia and NZ are the anomoly and only in the last couple of decades.