5 Borrowing Myths: Busted.
I don’t know if you remember the show ‘Mythbusters,’ where they took urban legends and put them up to the test to see if they were real. Recently I had a prospective client ring up and ask if I could get him a home loan while he was on probation at his new job…
I thought to myself ‘wow, this person believes in an urban legend. I wonder what other ‘borrowing myths’ need busting?’ After some thought, here are the top 5 borrowing myths and the facts.
Myth: Employees starting new jobs/are on probation won’t be approved for a loan.
Fact: There are lenders out there who will approve you with just a single pay slip. There are also lenders who will approve you when you can produce a signed employment contract.
Myth: “If I’m ‘self-employed or run my own company,’ do I need 2 years of personal and company tax returns to get a loan?”
Fact: Not necessarily. If your company pays you a fixed PAYG salary you can apply using your last 6 months of salary in an application. Any company profit won’t be considered in this case, only the salary your company pays to you. You can also do an alt doc loan at a higher interest rate if you can provide alternative forms of income evidence such as Business Activity Statements, business bank account statements or an accountants verification.
Myth: “My annual bonus income doesn’t count!”
Fact: There are lenders out there who will factor in annual bonuses as part of your income when assessing borrowing power. Most require a 2 year history but there are some that will just work of the latest bonus received.
Myth: Other shared home loans reduce your borrowing power.
Fact: There are lenders who use a ‘common debt reducer’ policy in their assessment process. Say you have an investment property with a loan with your brother and are looking to buy a home with your spouse… some lenders will count 100% of your investment mortgage against you while only giving you credit for your share of the property’s rental income when assessing you for a new loan. Lenders that use a common debt reducer policy would look at this case more accurately – splitting both the loan and the income according to your ownership percentage, resulting in a higher borrowing capacity.
Myth: Being employed in the family business makes it harder to get approved.
Fact: Many lenders do make it harder for family members employed in the family biz to get approved – like asking for a copy of previous year’s tax returns etc. But there are lenders who don’t make family members employed by the family business jump though extra hoops to get approved – they just need the normal payslips etc.
Moral of the story: The world of lending shifts regularly. Don’t ever think to yourself “There’s no way I can get a loan for that because…” – without checking with the team here at Mortgage World Australia first. Even if you think it’s silly, you are better off to ask the question and be sure than find out years later you missed your ‘opportunity of a lifetime.’