A Quick Overview
|Customer Goal||To purchase a new property to live in.|
|LVR and Term||91.99% (LVR) loan to value ratio, 30 years|
|Solution||Convincing the lender of the customer’s ability to service the loan and demonstrating the growing trend in his annual income year to year. And getting an exception on the postcode restrictions for the property location.|
The story: writing a new chapter
Peter led a fulfilling and contented life as a self-employed man. He lived in a house bought with his hard-earned savings.
It was only in his late forties that he realised, living with his mother would make him truly happy. His mother was getting older by the day, so being there for her became his top priority.
Taking heed to his mother’s wish of living in Agnes Water (4677), his entire family decided to move there, with her. They found a beautiful property that they loved and Peter almost immediately signed the contract of sale.
Next, in Peter’s plan of action, was applying for a home loan with his existing bank.
Self-employed varying income—a problem
For lenders, high-risk locations are those areas that have limited market activity and low recent real estate sales. Meaning, if a borrower defaults, the lender would have to wait for several months, or even years, to sell the property.
Agnes Water is considered a high-risk location by most lenders, so they severely restrict the maximum loan to value ratio they’ll lend in these areas.
Also, Peter’s varying income due to the nature of being self-employed did not help his case. His annual income of two years varied drastically. Lenders consider this to lead to a higher chance of default. So, they would not accept such self-employed income for mortgage.
There was no way a traditional major lender would consider accepting the restricted postcode for a person with the slightest chance of default. Hence, Peter’s existing bank and some other lenders knocked back his home loan application.
Getting an approval
The cooling-off period for the contract of sale was coming to an end, and Peter did not want to lose the property. So, to take a final shot at getting a home loan, he placed an enquiry with us at Home Loan Experts.
We got back to him asap and connected him with Ujjwal Maharjan, one of our experienced specialist mortgage brokers.
Ujjwal sat his client down to better assess his situation.
Peter’s self-employed career spanning 11 years showed stability and overall business growth. Our broker figured out that the only way Peter could get an exception for this property was by convincing the bank of his growing income.
Enlisted below are the solutions our broker applied to this situation:
- To prove the sustainability of recent growth in his income, he presented an accountant declaration.
- Upon convincing the lender to factor in the higher annual income among the recent two years, the loan serviced very well.
- The borrowing power calculation using the latest TR (taxation ruling) allowed LVR for the property to be over 90%.
- The lender was able to see the possibility of default was slim. Thus, they made an exception for the postcode restriction imposed on the property location for this loan.
A happy ending
Peter settled on the property and the family moved in.
His varying income in the two most recent years did not come in the way of cracking the $873,929 loan amount. In fact, we were able to get him approved for a high LVR loan of 91.99% of the property value.
In this way, Peter could move into a location his mother wished to live in, to a property his entire family loved.
Are you self-employed?
If you are self-employed and looking to get a home loan, please contact us!
Our specialist mortgage brokers are experts in self-employed home loans and know how to get a deal through!
You can call us on 1300 889 743 or fill in our free assessment form.