Many couples choose to separate the ownership of assets from the source of income.
For example, the husband may have a good income and the wife may buy the family home in her name with a home loan in both names.
Unfortunately, many banks don’t like this structure or many of the other ownership structures that involve trusts or other relatives.
So how can you get approved for a home loan with a reputable lender at a great interest rate?
What are the lending criteria?
Some of our lenders can consider your home loan if you meet certain criteria:
- You must be married or defacto and living together or intending to live together.
- One borrower must be on the title (an owner of the property).
- Both the husband and wife must be borrowers on the loan for their income to be considered.
- Your loan must not exceed 95% of the property value.
- The property must be a home, investment properties are not normally considered.
- You must meet all other standard bank criteria.
Do you need help to get your home loan approved? Call us on 1300 889 743 or fill in our free assessment form to find out if you are eligible for a home loan.
Why have all of your assets in one name?
If you own a business or work in a profession such as property development, law, conveyancing or construction then there is a chance that you could be sued.
Anybody taking legal action against you can potentially claim against the assets in your name. By owning the assets in the name of your spouse you may be able to protect yourself.
Why don’t banks like this?
Banks don’t like a joint loan for a property in one name for a number of reasons:
- It could mean that you are expecting legal trouble.
- If there are marital issues down the track then the partner that earns the income may be less committed to making repayments.
- It often means one of the borrowers isn’t working.
All of this is seen as a higher risk when compared to standard home loan applications.
Why is a home treated differently to an investment?
Several of our lenders will approve this structure if you are buying a home to live in, or, an owner occupied property. However, they have reservations if you do this with an investment property.
Firstly, the income earner doesn’t receive negative gearing benefits which means the loan may not pass the bank’s serviceability calculator.
Secondly, an investment property is a higher risk than an owner occupied property. If there is a marital dispute then there is very little incentive for the income earner to make repayments on the loan.
To the banks, all this is a high risk! Around half of couples get divorced and around one in eight couples split up in the first two years after buying a home.
What if I use a trust structure?
Firstly, if the husband is not a unit holder or listed beneficiary then the bank may see him as receiving no benefit from the transaction which means his income cannot be used when the bank calculates your borrowing power.
Even if the husband is listed as a beneficiary, it isn’t easy. Many banks have policies that only allow the income of directors of the trustee company or the trustee itself to be used in their assessment.
Call us on 1300 889 743 or fill in our free assessment form to find out if you are eligible for an investment loan in your trust.
What if I have bad credit and my spouse owns our home?
If you have credit issues in your name and your partner has a clear credit history then we can sometimes assist you to get approved, depending on the circumstances.
We have access to a range of bad credit home loans, with lenders that are flexible in allowing you and your spouse to both be owners or to have one person on the title of the property and one or both on the mortgage.
In these cases, it is preferable for the owner of the property to have sufficient income to make the loan repayments on their own.
The main catch is that some of our lenders will ignore the income of the person with bad credit, yet will still include their living expenses as a cost. The living expenses alone will cause your borrowing power to be $165,000 less than it actually is!
The key is to apply with the right lender that has a more flexible approach.
Apply for a home loan
Do you need our help to buy a property or refinance your home loan?
Call our mortgage brokers on 1300 889 743 or fill in our free assessment form to find out how we can help.