He brings joy to billions of children (and misguided adults) around the world but could Santa Claus actually be knocked back for a home loan in Australia?
At this time of year, Home Loan Experts thought it was about time to ask the big question (that no one asked!) and the answer may surprise you.
Banks can be really tough when it comes to deciding whether someone can afford a mortgage and they wouldn’t go easy on St Nick (hypothetically) just because he’s a top bloke.
Here’s why Santa needs a specialist mortgage broker to get approved.
He can’t prove his income
On paper, Santa is clearly self employed and banks just love to make it difficult for people who run their own business.
Lenders will usually want to see your last two years personal tax returns with Notices of Assessment.
Of course, this is assuming Santa earns an income at all! You can’t qualify for a home loan if you don’t have a source of regular income adequate enough to “service” or meet your mortgage repayments.
For the sake of argument, let’s assume that the old fella is getting a kickback from parents. He would need to have an Australian Business Number (ABN) and declare this income come tax time.
As self employed borrowers know, it can be really difficult to stay on top of your tax returns when you’re running a business, even if he only works one day a year!
So instead of tax returns, Santa could provide the following and qualify for a low doc home loan instead:
- 12 months’ BAS statements showing a high turnover.
- A letter from his accountant to confirm his income is correct.
- Business bank statements showing a high turnover.
- Old tax returns (over 24 months).
- Interim financial statements.
Santa’s long work history is a positive!
Lenders usually require you to have been self employed for at least two years before you can apply for a home loan (although there are exceptions to this with some lenders).
Santa has been Santa for hundreds of years and, as an immortal being, he’ll continue to work indefinitely in the same line of work. Banks will absolutely love him for this!
What about his age?
Let’s be honest: Santa is ridiculously old and he’s not doing his health any favours with his cookie and milk diet!
As a general rule, there are three important things to remember if you’re over 50 and you need a home loan:
- You need a defined exit strategy.
- You must repay the loan prior to your retirement.
- You should apply with a lender that understands and accepts mature age borrowers.
If Santa had plans for retirement, he’ll have to hold off until he repays the mortgage.
How would banks view his expenses?
If Santa is getting paid by potentially billions of parents around the world, it makes you wonder why he needs a home loan in the first place!
It may be that he’s spending way too much on his Christmas expenses.
Like a mortgage application for you and me, banks will be looking at Santa’s ingoings and outgoings carefully. If Santa has high expenses compared his income, then banks may question whether he can actually afford a home loan.
Of course, as a business owner, Santa may claim expenses, such as the use of his magical sleigh as a company car or big one off costs, for the purposes of reducing his taxable income.
There are lenders who can actually “add back” these expenses to your “assessable” income so he can potentially borrow at a higher Loan to Value Ratio (LVR).
His property is in the North Pole!
Many borrowers use equity in their existing property to buy another property.
Santa owns his own home but the problem is that it likely won’t be accepted as security for a mortgage.
The reason is that banks have postcode restrictions meaning some property locations – like the North Pole – would not be accepted.
On top of that, the building itself would be quite old and may not be council-approved – does the North Pole even have a council?
In order to get approved for an equity home loan, the bank will have to run a property valuation.
Not only would the valuer have trouble gaining access to the property, the location itself would only appeal to a very, very small market. We’re talking penguins and polar bears here!
This would make it very difficult to sell should Santa default on his mortgage.
Check out the property types page for other locations and property types that may not be accepted for a home loan. With some lenders, you may still get approved!
Santa is a foreigner
It’s fair to say that Santa is a citizen of the world and he’s more than welcome to let himself into your home while you’re sleeping.
Creepiness aside, the fact is that Santa isn’t a citizen of any one country either, including Australia.
As a foreigner, he can still qualify for a mortgage but foreign citizens living outside of Australian are limited to borrowing up to 80% of the property value.
The borrowing limit is the same if he decides to make his home Down Under.
Is there a way he borrow more than 80%?
Yes! If Santa marries an Australian citizen he could borrow up to 90% or even 95% of the property value!
Not sure how Mrs Claus would handle that though!
Can you get approved for a home loan?
If you’re in a situation that’s a little outside-of-the-box, such as being self employed with little to no income evidence, over 50 or a non-resident, it can be really tough to get a home loan.
However, a specialist mortgage broker that has a strong understanding of credit policies from a number of Australian lenders can always put you in a better position to get approved.
That’s because they understand getting approved comes down to building a good case with the right lender.
Call us on 1300 889 743 or complete our free assessment form to speak with one of our experienced mortgage brokers.
We can help you own your own home in 2016! Have a Merry Christmas!