Home Loan when employed by a Family Member / Family Business

Any general questions you might have in regards to loans and finance.
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thomas
Posts: 64
Joined: Wed Jun 24, 2009 4:16 pm

Home Loan when employed by a Family Member / Family Business

Post by thomas »

Hi there,

Are there any lenders who can lend to someone who is employed by a family member? My dad owns a business, I've been working for him for around 2 years now. I earn a good income but I can't provide any evidence of this as my dad doesn't issue me payslips. I've been told by a broker that PAYG low doc loans no longer exist, what should I do?

-Tom

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Home Loan when employed by a Family Member / Family Busi

Post by Otto Dargan »

Hi Tom,

Yes it is possible to apply for a home loan while employed by a family business. We commonly help people who work for small businesses who do not issue payslips.

Banks don't seem to understand why some people do not have payslips as by law every employer is supposed to issue them. However in reality most small business owners are focused on running their business and don't have much time to handle the paperwork.

You can consider some alternative methods of verifying your income. This would be the best option. By using this method you can apply for a loan for up to 80% of the property value.

You would need to provide just one of the below documents:
  • Your most recent group certificate (not hand written).
  • A letter from your employer confirming your income. Note that in most cases this cannot be written by a direct family member (e.g. mum or dad) however can be written by other employees in the business. Discuss with our brokers for more info on how this works.
  • Your most recent tax assessment notice (all pages).
  • Your most recent tax return (all pages).
  • Bank account statements showing your salary going into your account (minimum 2 pay periods, ideally > 3 months).
The other option you have is a PAYG low doc loan that can allow you to borrow up to 60% of the property value. Note that I believe this product will be withdrawn very shortly!
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

thomas
Posts: 64
Joined: Wed Jun 24, 2009 4:16 pm

Re: Home Loan when employed by a Family Member / Family Business

Post by thomas »

I get my salary credited directly to my bank account every month on the same day so that shouldn't be an issue, I can provide statements to show this. Is there any way at all of borrowing over 80% of the property value? I'd like to borrow as much as I can, my dad is happy to go guarantor if need be, he owns his property outright. Is this possible?

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
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Re: Home Loan when employed by a Family Member / Family Business

Post by Otto Dargan »

If your salary is deposited into your bank account and you can provide a letter from your employer as well then we should be able to get you a loan for over 80% of the property value. 90% should be ok, 95% on a case by case basis.

If your dad can offer his property as security as well then you can apply for a family pledge home loan (guarantor loan) and you can borrow 100%, or even a little more, without paying any LMI.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

thomas
Posts: 64
Joined: Wed Jun 24, 2009 4:16 pm

Re: Home Loan when employed by a Family Member / Family Business

Post by thomas »

Thanks for the info! In regards to LMI, would the LMI increase significantly if I were to borrow 95%, or would this depend on the bank my loan goes to? Is there anything in particular that the banks are cautious about when lending up to this LVR? I don't think there is anything difficult about my situation besides the fact that I can't provide any payslips.

With the guarantor loan option I've read the page to the link that you've provided & it seems like banks are more conservative with this type of loan... but would this be the best way to go for my situation? Mainly since I don't have much of a deposit saved at the moment and I'd like to borrow as much of the purchase price as possible, & with a guarantor it looks like the lenders are willing to lend 100%.

Appreciate your replies,
-Tom

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Otto Dargan
Mortgage Specialist
Posts: 7730
Joined: Sat Sep 06, 2008 5:55 pm
Location: Sydney, Australia
Contact:

Re: Home Loan when employed by a Family Member / Family Business

Post by Otto Dargan »

Hi Tom,

Yes LMI increases significantly when you borrow over 90%. Although it is still a good option to borrow 95% as the interest rates are still excellent, it is even better to go with a guarantor loan. This is because there is no LMI and the rates are competitive.

With a guarantor loan the lenders have very different policies. Some require proof of 5% in genuine savings, others don't need any savings and can even allow you to consolidate debt!

The most common problem people have is when their guarantor is retired as many lenders do not accept this. We have a few lenders that can accept retired guarantors as long as they are immediate family members (e.g. parents).

I would recommend a guarantor loan over a 95% loan for most people. Of course we would need to see the full details of your situation to see if there are any other potential credit issues and to confirm that this product suits your needs.
Otto Dargan
Mortgage Broker
P | 1300 889 743
Home Loan Experts

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