Will the banks touch us?

[tess85]

Hello SS. What a change a year has made. Last year hubby and I were both working full-time, no dependants, the banks were quite happy to lend us money

We are thinking of getting our next IP, having spotted a few buying opportunities, but our financial situation has changed quite a bit in the past year!

Hubby: contracting, 6 month contracts at a time, $120k pa gross excl super
Me: working part-time, $45k pa gross excl super
1 dependant

Rental income: IP1 ($285 pw, $150k owing) and IP2 ($480 pw, $230k owing), neutrally or slightly positively geared after expenses

Other liability: PPOR ($480k owing)
All loans I/O variable

We have $3k per month to service any new loan that we take, and enough savings for a 20% deposit on a $350k IP. It wouldn't leave us with much of a buffer but we do have bit of equity in the PPOR and IPs, at least $100k. Should we be trying to access that??

I wonder if I need to go back to work fulltime though..... have the IP buying itch but not sure if I can convince the banks due to hubby's contracting status and my part-time status. Any thoughts gratefully appreciated. Oh, and hello SSers, it's good to be back

 

[Aaron_C]

Hi Tess - is your husband self-employed or is he on a PAYG income? Makes a big difference to your ability to borrow.

 

[tess85]

Thanks ACE. He is on a PAYG - gets paid thru the recruitment company, monthly. That's as far as I know...

 

[Aaron_C]

Well everything looks fine even if you don't go back to full-time work from a serviceability point of view. Just contact one of the brokers here and they'll let you know how much you can afford etc.

 

[tess85]

Hmmm really? That surprises me, I thought for sure that the banks would not touch us due to my husband being on a contract AND me being on a part time wage AND the depandant etc.

So we can possibly buy a $350k IP, that's good to know. Now what's the chance of buying that $850k dream home that has been heavily reduced (distressed vendor) and is an absolute steal.... gah wish we didn't have to sell something if we wanted to buy that one!!

 

[Aaron_C]

Hmmm really? That surprises me, I thought for sure that the banks would not touch us due to my husband being on a contract AND me being on a part time wage AND the depandant etc.

So we can possibly buy a $350k IP, that's good to know. Now what's the chance of buying that $850k dream home that has been heavily reduced (distressed vendor) and is an absolute steal.... gah wish we didn't have to sell something if we wanted to buy that one!!

Because your husband is an 'employee', he receives payslips every fortnight/month which can be shown to the bank as PAYG income. You don't have to tell them anything more than what his actual position is/how much he earns. As for whether you can afford an IP, how much are your properties currently worth? Hard to base anything on loan values alone without assets!

 

[Rolf Latham]

Hi Tess

I suppose a couple of things to consider are

1. How do you see you OWN serviceability with just the one income
2. Is the income "secure", I suppose a perm job aint secure either, but u know what I mean

ta

rolf

 

[Mick C]

Hmmm really? That surprises me, I thought for sure that the banks would not touch us due to my husband being on a contract AND me being on a part time wage AND the depandant etc.

So we can possibly buy a $350k IP, that's good to know. Now what's the chance of buying that $850k dream home that has been heavily reduced (distressed vendor) and is an absolute steal.... gah wish we didn't have to sell something if we wanted to buy that one!!

With such a massive change in employment and growing family- ROLF Mentions a important consideration; make sure you can personally afford the debt and how stable do you think your situation/employment is currently?

Arron_ C is right, since his PAYG some banks will do this as an standard employment but may require some extra information/requirement depending on the lender: ie
1. May want to see 6 month Pay slip rather then 2-3 month
2. If his contracted to one client; may want to see a letter from client to say your husband will have another 6-12 month work etc...


Just be aware every bank and deal is slightly diff especially if your applying for something slightly out of the box; so get a broker to organize a approval first before you start signing your life away + 10%

** last thing you want is to shop around with every bank and trash your credit file.

Regards
Michael

 

[tess85]

Thanks all. some important things to consider re: stability, but at the moment all is looking good for IP #3 then

 

[Deltaberry]

Because your husband is an 'employee', he receives payslips every fortnight/month which can be shown to the bank as PAYG income. You don't have to tell them anything more than what his actual position is/how much he earns. As for whether you can afford an IP, how much are your properties currently worth? Hard to base anything on loan values alone without assets!

Very good advice. All the bank needs to see are a few payslips they have no idea what it is.

 

[tess85]

Very good advice. All the bank needs to see are a few payslips they have no idea what it is.

Didn't expect this, but not complaining! I'd always heard that it was harder to get loans as a contractor... Typically contractors get a higher rate of pay in return for less stability/flexibility, but hubby almost considered not being a contractor b/c we wanted to buy another IP. Now we have the best of both worlds it seems.

I guess if you were self employed it would be a different matter.

 

[Aaron_C]

Didn't expect this, but not complaining! I'd always heard that it was harder to get loans as a contractor... Typically contractors get a higher rate of pay in return for less stability/flexibility, but hubby almost considered not being a contractor b/c we wanted to buy another IP. Now we have the best of both worlds it seems.

I guess if you were self employed it would be a different matter.

That's because contractors are self-employed...they don't get payslips like PAYG employees do.

 

[Marty McDonald]

No way they are not all that dense! Payslips from an agency might occastionaly slip through but normally there will be give aways for the lender which will prompt more questions such as the agency fees noted on the slips as a deduction, the name of the employer ie Paxus, Hudson, Hays etc etc.

It doesn't mean it's not doable but will require a bit more than 2 payslips and better to just go to the right lender first time.

 

[Deltaberry]

These guys are paid like $60k-$70k, and you're telling me they're not dense. Well maybe they're not, but it's certainly an issue of they don't care.