Whether you’re planning to buy your first home or investment property, or just want to upgrade to a larger dwelling, it’s essential to maximise your borrowing capacity by fully considering all your income sources.
Banks and other lenders assess your supplementary income streams quite differently to your base salary. And each bank employs their own unique set of policies and criteria to determine how much they’re willing to lend.
It’s important to have an experienced mortgage broker thoroughly identify and appraise all your income sources because whether your income is assessed correctly or not could mean the difference between securing your dream home, or missing out to another buyer.
1. Bonus Income
Do you earn a regular bonus at work? If you do, then don’t forget to include evidence of this additional income with your payslips or group certificates. But remember that most lenders will only consider bonus income if it’s paid quarterly or monthly. Annual bonuses may not always be accepted.
If your job involves steady commissions, then you can include this extra income when applying for finance. But in most cases you’ll need to be able to show consistent commissions over your two most recent tax returns, or your Group Certificates and PAYG Summaries
Some companies offer employee benefit packages such as car allowances, shift allowances and penalty allowances. Each lender assesses these allowances differently. Some may cap the car allowance at $5,000, even though your own car package could be $20,000 or more. It’s essential to ensure these allowances are correctly documented in your application.
4. Rental Income
If you already own an investment property, then make sure to include your rental income. Most lenders use 80% of the rent when calculating your borrowing power. Some banks account for negative gearing, while others don’t. If the property is jointly owned, the lender may only accept half the rent, while assuming you’re liable for all the debt.
5. Holiday Rental Income
Holiday homes also generate an income stream, however this may not be as dependable as a regular investment property. The location of the dwelling, and whether you have declared the income in your tax returns for the previous two years will also be taken into consideration.
6. Share Dividends
A dividend is a regular payment generated by shares that you hold in the Australian or international equities markets. If you have a healthy share portfolio, then you can include this income stream in your application.
There are various different types of pension, and each must be assessed on a case-by-case basis. Some pensions will be allowed, while others may not be accepted. An experienced mortgage broker like Mortgage Corp can quickly identify the best lender to approach, in order to achieve the highest probability of acceptance for each type of pension.
8. Family Tax Benefit
If you have a dependent child younger than 16 years of age who is not receiving another government benefit, and your income is below a certain threshold, then you may be eligible for Family Tax Benefit A or B. Many lenders will include this income stream to determine your borrowing capacity, depending on the number of children you have, and their ages.
9. Child Support Payments
The Child Support Agency provides additional payments to qualified parents based on your income and the age of your children. Don’t overlook this source of income when applying for finance. It will need to be evidenced by court orders, agreements, or payment history over six months.