Hi everyone,
I know that without income you can not access to Home Loan but is it possible if I can deposit up to 80% value of the house and access to 20% value for home loan? I know it is very rare case like this but just want to know whether it is happened.
Thanks
You can, depending on how much is the 20%. When you borrow the home loan, tell the banker it's investment, the rent is x, that's your income, that's your 20% loan.
The bigger the rent the higher the loan, you need some sort of proof that it will earn that much, usually screen shot from domain is enough, but sometimes u need more, like real estate agent letter.
After you settle, u can kick out the tenant n love there, bank don't care as long as u pay your loan.
That would be a waste. There are heaps of tax implications for not declaring the property as your principle place of residence. No CGT when you sell for PPOR, but CGT applies to investment properties. Interest Rates would be different too.
Settle as investors, then change to primary residential after settlement.
Works easier if purchasing property with Tenant in it.
I know that without income you can not access to Home Loan
OP answered his own question. /thread
How are you planning on paying that 20%?
If you are on a pension, no bank will lend to you any more. Also, if you have 80% of a $500k mortgage in Savings, you wouldn't qualify for a pension anyway
Yes but if you have a $500K house as an asset you will be eligible for the pension
Also I believe the OP is proposing to gift the $400K/80% to his mum
You are right to suggest OP should be careful about how he goes about that gift to maintain pension eligibility
In truth all the trouble of transferring $$, buying property in mum's name and transferring back one day, etc might not be worth it for the FHOG.
$15K now versus lots of cost and hassle later or possible loss of pension
Homestart Finance in South Australia will lend to you if you are on a government allowance as your sole form of income. This is the exact sort of scenario they would do it in too, but you would need to be purchasing and residing in the property, in SA.
that doesn't sound right, which pension are you referring to ? aged, disability .. something else?
the DSP for example is pretty miniscule - its a joke for people who need to see specialists and pay for meds + transport
Sell the house.
I expect that you should be able to as long as you have some income. Assuming a 500k house, you're saying you have 400k and want to borrow 100k - so borrow 100k with a 400k collateral. Firstly, 100k * 3.5% = $3500pa ~= $300/month interest. You could probably service that level of debt on the dole if you REALLY try. If you used the house for something productive (got a boarder) then you'd pay it off easily.
In the case that everything goes horribly and you can't repay the loan, the bank will forcibly sell your asset and recoup their money. As long as your house is still worth more than 100k, and there are no other creditors, then the bank can easily recoup their costs - so their risks are small.
Exactly - many pensioners pay rent well over $100/week
I imagine the OP mum could pay $100 or $150 for her own home and still live OK - better than some at least
OP - I think traditional banks like CBA will not be helpful with a direct approach
Maybe find yourself a reputable mortgage broker who can search the market for lenders who will consider your requirements - I bet there are a few who will
Might even save you on interest
Is it not possible for you to find an 80% priced house?
Yes ask "How much for CASH?"
It doesn't work with house If The previous owner is not a bsnk
Honestly OP, if you are in a position where you are without income but have significant deposits, you may be better off renting a modest place and making that amount of money working for you.
Buying a house sans any ability to repay it will eventually lead you to having nothing, this is even if the banks entertain such a proposal. Furthermore, how are you going to LIVE let alone pay Council Rates, Sewerage etc?
+1. houses are expensive to live in, even after you've paid the mortgage.
a $500k house might cost $20k/year to rent.
a fully paid for $500k house might cost $5k/year just to live in. insurance, rates and maintenance all add up. kitchens, bathrooms, roofs, hot water heaters, etc, etc, are expensive, need to be maintained and don't last forever.
i doubt it. the loan needs to be serviceable meaning you have to continually come up with funds to pay the bank back. Without income I cant see this happening on a normal home loan.
Thank you everyone for your comments. Actually, I intend to give my mom buy a house with 80% deposit and she can access to first home buyer as well. The issues is she does not have any income. If I and she buy a property together, she can not claim as first home buyer. I have income and will pay everything for her but struggle is whether she can borrow or not.
you can go guarantor as well if necessary.
Does the first home buyer grant require a registered mortgage? Otherwise, you can loan her the full amount, get the grant, then forgive the loan.
I ask CBA they told the guarantee loan just applied for deposit not for the whole loan. Actually, CBA reject her to get a loan
What mskeggs is saying is that "You" can "loan" her the "full amount directly" and she may still qualify for FHOG. All you would need is some paper agreement I assume and your solicitor/lawyer could help with that.
Yea, do the guarantor thing.
Tell them you will pay for her.
put 1 of your properties up as insurance.
That's fraud
Why is it fraud? Can OP's mom not have her own home?
Because OP is buying another house (for mUm) and he/she already claimed the grant him/herself
@Cheap Charlie:
Not sure why you got negged.
Regardless of where the OP's mum gets the money, if she buys a house for the first time and is otherwise eligible, there is no fraud.
Personally, I think it is going against the spirit of the program - to assist first home buyers who would otherwise struggle - but it isn't illegal.
@juicedpixels:
The OP is lending or giving money to their relative. That person is then seeking to claim the FHG.
The relative is able to claim the grant if they meet the requirements.
@juicedpixels: Actually I give my money to assist my mom to buy a house. And of course, when she die, she give that one back to us. I do not see any issues here.
@zack1502: Let's be transparent here, you effectively just wanna use a family member to scam another FHOG, that's pretty obvious…at least man up about the game & don't hide behind false altruism. If you were fair dinkum you'd just buy a bloody house for your mum with your own resources & STFU about it.
@StewBalls: Hi Stew, my mon has suggested what I am asking here. It is not my option but she just think she can help her son a little bit money instead of her son to pay for her too much (I am not so rich). Anyway, I will go with my decision which is appropriate for my situation and if it does not affect to the rules and regulation. I think it looks like your parents give you money to buy a house. That's what I am think but i'm sorry but if it is not what you are thinking.
@zack1502: I don't think its fraud, but you would want to do some serious research into how the tax office looks into "gifts and donations". i think they would be coming after you if they found out
I'm not a lawyer but from what i've discussed with my accountant previously, for the same reason that your employer can't just turn around and "gift" you a salary and hence you pay no income tax, I think you could be heading for a world of ATO hurt
Remember normally if your mother was to give you a house when she dies, you would have to pay estate tax. Similarly, you can't just swap a house (or a car) with family members without paying stamp duty. Therefore i would imagine this situation is considerably more complicated than you simply give your mum a bunch of money to buy the house
Also, without being negative, how can you say "i'm not rich" but have 80% of the cost of a house sitting around ready to go? Unless you're planning to do some kind of self-managed super thing here? in which case you're in for ANOTHER world of hurt, since it again isn't as simple as treating the super like normal money
Seriously, go speak to decent accountant or a lawyer first, THEN maybe go talk to the bank
@jellykingdom: Thanks Jelly, That's what I am thinking too. Just think all options and will decide which one is better. The 80% deposit include my money and my mom's money as well not only me. So I think it is more appropriate if I and my mom together buy a house. But when she dies, should I still pay estate tax even I together with her to buy that house?. You are right that I should look for a decent accountant or a lawyer at this stage.
@zack1502: Yeah man see I have no clue if you both own it but in uneven proportions. Its a weird scenario. i don't THINK you'd pay estate tax but not sure
Maybe do a quick google on how other children-parent house purchases are handled, or give a quick ring to a mortgage broker as a starting point. That is pretty common nowadays
@jellykingdom: You have mentioned "estate tax" in your two posts.
Probably best not mention stuff you only think is correct.
@Baysew: Did not know that, though I see where I got confused - you pay CGT after you sell the deceased assets, not when you receive. I was only trying to make the guy aware of some possible implications, and did say I didn't really know and he should speak to a lawyer or accountant! It also seems likely he would want to sell the now-surplus house afterwards so it would be applicable
She us not helping her son, all the other tax payers are. That money comes from my and others wages. Should be fraud even if it isnt
I don't think its fraud, but you would want to do some serious research into how the tax office looks into "gifts and donations". i think they would be coming after you if they found out
I'm not a lawyer but from what i've discussed with my accountant previously, for the same reason that your employer can't just turn around and "gift" you a salary and hence you pay no income tax, I think you could be heading for a world of ATO hurt
I think gifts and donations are not taxable, just like the money you win from gambling or lottery. They even give you 50% discount on "gambling" with shares or property prices.
Just go joint borrower with your mother, however only have the title under her name. Problem solved.
Yes, just asking for the difficult option to see whether it can happen or not. I will go with possible option like you suggested.
Not sure how the FHOG works if you have 2 family members going in, but for defacto situation NEITHER person can have had the grant before. I'd owned an apartment, my partner hadn't, but we couldn't simply put the house in her name and get the grant
Therefore i doubt you can go joint on the title
Yes possible. Unemployment payment does not count as income but aged/disabled pension does, if you can service the loan. It depends upon the amount you are borrowing, why people assume its for a $500 000 house is strange. You may need to use a broker. I have family been in a similar circumstance, they were rejected by aussie and one other, went through broker, broker said commonwealth or anz, got pre-approval for anz, got loan, bought house in rural vic.
Well drug dealers need to buy property somehow…
All this….just to get FHOG.
Perfectly ok.. This is OzBargain after all..
Well that's a free 7k.
No income means banks could be in breach of responsible lending legislation.
Generally speaking, it is theoretically possible, however, it would be considered risky and as most have pointed out - it would also be overwhelmingly likely to require you to make a repayment (i.e. it probably wouldn't be an interest capitalising loan). So most would argue that doing this is not a wise move dependent on your cashflows.
So, with that out of the way, the short answer is that you would need to avoid the NCCP Act to get approved. You could possibly do so by buying the property in a company name or corporate trust and consequently borrowing in a corporate entity.
Hope this helps.
EDIT: We just realised from your later comments (that were ghosted by downvotes - LOL) that you were looking to do this to claim FHOG. The above approach would not be consistent with a FHOG scenario - but could be useful information to others considering this scenario for different reasons.
Banks have clamped down pretty hard on lending criteria - I don't think any bank will provide what OP is asking for here. I needed a large bridging loan around a year back and CBA/WBC weren't interested in guarantor letters. Also if OP is putting up the deposit it needs to be in mortgage holders name for a period of time before bank accepts it as genuine savings. If OP mother has sufficient income to service the mortgage (rent, investments, govt benefits etc) then it could work but doesn't sound like it from OP's description.
Seems a bit of bother just for a FHOG. Also if this is an investment then you don't get to negatively gear if it's in someone else's name.
I thought the whole idea of a lowdoc loan was that you don't need to substantiate income? Why isn't a lowdoc loan suitable in this circumstance?
True low doc loans only exist for businesses since the NCCP Act came into effect. The few loan products that exist for consumers that could broadly be described as a 'low doc' are now alternate verification loans that will still try to make a proper estimate of income albeit without financials. It's also worth noting that low doc loans for PAYG applicants are, by and large, a thing of the past.
Hope this helps.
Ok, thanks for that info.
What about the loophole that someone posted on OzB recently where you fill out the paperwork saying your current home and the new one for their mother will both be rented out so the rents cover the mortgage. Then after the loans are approved you "change your mind"? (Not that I condone the idea)
How much are we talking here? If you have 80% of a $600k mortgage, wouldn't it be easier to downsize and buy a house or apartment you can pay off 100% right away?
Of course we did not intend to buy an expensive house. Just under $400,000 house. I do not have much money to put 80% deposit with $600k mortage
Lending criteria is a bit funny. A couple of years ago I was looking to borrow less money than I had. eg. 1 million cash, and wanted to borrow 600k to buy an apartment in order to not lock my liquidity up. It was during a time while I was taking a break from working. It proved difficult such that I didn't actually end up bothering.
Ironically the banks seem to value cash very low. They will soon change their tune when their liquidity dries up WHEN (not if) the market eventually turns on them!
Asset based lending (i.e. loans based exclusively on collateral offered not cash flows) still exist. But they only exist in the commercial lending world. The NCCP Act 2009 effectively eliminated asset based lending for consumers and those looking to buy residential property in personal names. It sounds as if you were looking for a loan that probably would've fallen under the NCCP Act. If not, you may have had some bad luck, as a commercial applicant with $1,000,000 cash is typically a strong candidate for a loan.
Hope this helps.
I have a perfect credit record and two paid off mortgages 20 years early and discussed a small loan against land title as security and the manager said politely don't even bother if you aren't employed. Same bank that I borrowed from, account opened for 30+ years and perfect record and land title security for $5k or $10k loan and a big no, you'll affect your credit for being rejected. I asked if an agreement of selling one property in a year made any difference, but the guy said loans are processed coldly with ticks in boxes by automaton staff. Only on ads do they think outside the box.
It's pretty absurd. All that stands between someone earning cash and not earning income is merely a matter of weeks. The way this country doles out money for income earners is crazy, yet beyond someone having an income little seems to be taken into consideration. I know several people with mortgages costing 1k+ per week, and they have absolutely nothing in their name besides a small amount of equity in the place theyare living in and have mortgages on.
If any of the above fails;
Set up a second bank account and pay yourself a regular 'wage' into that from your original bank account, then in 6 months time you have bank statements showing regular income of whatever you want !!!
Get extra smart and set up a company and pay from that into the second account.
Oh but wait, that's wrong, it's ok for banks to destroy millions of lives ('08 GFC + thousands of other examples), but you should never be sneaky or tricky with the bank.
Why not buy a house that costs 20% less?
got same problem,
sold a house, lost job, now cant get a home loan even though have the cash to buy house outright, but dont want to so i have the money to move if want later.
banks says without income, cant meet repayments…. so i am more of a risk than someone with a job but sfa deposit, who has a high chance to lose job anytime after hiomeloan made…. what do they think i will do, goto the casino… they c
It's because banks have to follow responsible lending legislation / NCCP Act. If you have no income and a lender is aware of that and they still give you a loan they could be in breach of the law. You as the customer if you find yourself in hardship because of the loan you were given can get a court to set aside the contract and receive compensation.
Banks don't want to have conditions placed on their credit licence due to loans that they shouldn't be approving anyway
Its a funny one really - this guy has the money to buy outright, but the bank will lend money to an 18yr old with a $20k income to buy 5 investment properties (if the newspapers are to be believed)
understand, solution … so create an offset account that must have $ X put in it as security that cant be accessed until you have income to meet repayments….
theoretically too, if i was to face hardship i am going to face it renting long before buying.. as rent is higher than mortgages these days.
my mate just got a 688k loan with a 50k deposit… yet i cant get an 400k loan, despite having 600k in cash and more than happy to permanently store in a bank security account and a 100k deposit to meet 80%% LVR.
stupid tax laws in australia mean if i spray 500k on a house and buy outright, and then move cities, i cant get a 400k equity loan and put it back for in an offset on new house and claim the interest as a debt on what would be the IP that was once PPOR…. i have to sell it to get the money back out.
also earned 100k+ for lets say 15 years straight and yet because i do casual work / contracts its not secure…. better go to aldi and get permanent job
Buy the house outright and put it into reverse mortgages.
Fees and everything will add up.
This is NOT the place to be asking this question. Go ask your bank or your mortgage broker. Keep in mind that the lender will apply certain criteria to ascertain if you can pay off the loan at a certain interest rate within a certain time frame. So if you have no established income stream then you have your answer already.
Pensions ARE considered income, unemployment payment is not.
No. In order to get a loan you need to show income for a year to prove u can service the loan
Could you go guarantor for the 20%?
even if you had 99% of the deposit for the house and needed a 1% loan they will not lend you any money without any income. the very basic questions they ask you when applying for any loan, credit card, personal loan is do you have a have a job, how much do you earn , what are your living expenses and other commitments. how will you survive with no income. Cannot say I will live off my parents etc. Need to show steady money earned.
welcome chinese investors!
Nope. I've tried, and I had an income, just not a full time wage. I had a 20% deposit too.
I can live off of practically nothing and I save almost every dollar, but the bank doesn't care how well you save, only how much you make.
You had 20% desposit whereas op has 80% deposit if I read correctly.
My bad, got the percentages switched
Oh did something similar (much smaller scale). My mum was buying a house, had most of the money, only needed a $20,000 loan or so, but wanted the property in my name, I was a uni student on austudy and she was a pensioner. They happily gave me the loan knowing full well that my mum was going to be the one paying.
Given this was 25 years ago or so. Not sure lenders will be as lenient now.
Please define the word "Massive" in the first place.
No, I tried and couldn't. Quite a few years back I wanted to upgrade. My current house was paid off and I needed $60K from the bank to buy the next house ..purchase price $560K. I was made redundant Just before making the application. They wouldn't lend me the money until I had a new job. I lost the house I wanted to buy :(.
pretty sure this works, but do you have a home, use it to borrow 20% of what your mum needs
then give your mum 100% to buy her home while you pay off the loan on ur house
not sure if this is classed as a personal loan or home loan, u have to ask the bank (might mean slightly higher interest)
sounds like you need sound professional advise based on honest facts.
There would be so many variables in play here, it would all depend on your ability to mitigate the risks identified by the financial insistute. Talk to your bank, anything anyone provides on here would be very much case by case basis and wouldnt give you any real insight.