Last Updated: 8th November, 2022

Stipend can increase your borrowing power

Nurses or registered medical professionals at hospital/hospice or the disability, aged care or wider health industry typically receive stipend income for basic living expenses such as housing and running a car.

Members of the clergy or charity/not-for-profit sector classified as public benevolent institutions (PBIs) may also receive a stipend.

Only a handful of lenders will accept this form of income and we know who they are.

Stipend mortgage lending criteria

A stipend or benevolence income is a fixed payment that you receive regularly from your employer to cover such basic living costs as food, housing, phone or motor vehicle costs.

Some lenders will accept this form when assessing whether your income is enough to cover the mortgage repayments for the amount that you’re borrowing.

This is otherwise known as your serviceability, and by using stipend income, you’re potentially able to borrow more.

How much can I borrow?

A stipend mortgage is the same as any other type of mortgage, so you could potentially borrow up to 95% of the property value if:

  • You’re in a strong financial position.
  • You have stable employment.
  • A clear credit history with little to no debt.

There are other requirements for borrowing at a 95% Loan to Value Ratio (LVR), but the trick to getting approved and borrowing at a higher LVR with a stipend mortgage comes down to how the bank assesses your income.

Find out if you qualify for a stipend mortgage!

Call 1300 889 743 or complete our free assessment form to speak to one of our mortgage brokers today.

We’re specialists in helping Australians who have unusual income arrangements.

How much stipend income will be accepted?

Most banks assess your gross income without taking into consideration stipend income or fringe benefits.

Other non-base income can include overtime and bonuses.

Not all lenders are the same!

Some lenders will actually consider up to 80% of stipend income when assessing your income situation as long as you can provide an employment letter stating that:

  • The stipend is regular and ongoing.
  • That you have long term employment with the organisation.

If you’re in a strong financial position and can show that you don’t need the stipend income to cover your basic living expenses and it isn’t being used to cover other debts, one of our lenders will accept up to 100% of this income for a stipend mortgage.

The reason is that stipend income is tax-free and it’s reducing your living expenses.

What do I need to provide?

Apart from your last two payslips and your last two years payslips, the employment letter should detail:

  • The length and type of employment, whether its full time, part-time or casual.
  • A complete breakdown of the payments you receive and whether you use the payments for your own personal use or work purposes only.
  • The conditions surrounding the stipend payments, such as whether they cover just living expenses and not fringe benefits like car parking and entertainment.

You’ll usually also need to provide your last 3 months salary credit statements showing regular stipend contributions into this separate account.

As long as the stipend is tax-free, ongoing, has no conditions attached to it and won’t be subject to change, it will generally be accepted by the bank.

The great thing about stipend income is that it’s tax-free, so you can borrow at a much higher LVR than if you were to just use your base income for serviceability.

Do I need to be in healthcare?

Although stipend income is characteristic of healthcare workers, particularly nurses, other organisations pay what is known as benevolence income to its employees.

These organisations are known as public benevolent institutions (PBI) and are typically a type charity or not-for-profit whose primary purpose is to relieve poverty and distress in society.

PBIs are registered with the Australian Charities and Not-for-profits Commission (ACNC) and, apart from receiving tax concessions themselves, actually provide tax-free benefits to some employees, particularly those who work full time.

These stipends are fringe benefits for tax purposes, and the Australian Taxation Office (ATO) applies certain stipends per employee depending on the organisation.

These types of organisations include:

  • Health promotion charities ($30,000 per employee).
  • Other charities registered with ACNC.
  • Some public and not-for-profit hospitals and hospices ($17,000).
  • Some disability support services.
  • Some aged care services.
  • Religious organisations like churches.
  • Providers of low rental or subsidised housing for people in need.

These thresholds change on an irregular basis so you should confirm, firstly, whether your organisation is a PBI and, secondly, whether you are receiving tax-free stipend income.

Example of stipend mortgage

Tom is a nurse earning $100,000 and receives receives a tax-free meal allowance of $600 a week.

So while Tom’s gross income is $100,000, his after-tax is only $68,800, leaving him with around $31,200 of take home pay.

Under normal circumstances, Tom would be taxed around $27,162, leaving him with $72,838 for the bank to assess when he applies for a home loan.

However, in this situation, Tom’s after-tax income would be $53,358 plus $31,200 of the tax-free stipend he receives through the government.

In this case, Tom’s income would be assessed at either $81,318 or $84,558, depending on the lender.

Assuming no other dependents or debts, including car loans, personal loan or HECs/HELP debt, Tom could potentially borrow up to $1,085,618.

Disclaimer: The above figures are rough estimates based on current Australian Taxation Office (ATO) tax thresholds and based on the financial circumstances of the individual in this scenario. Changes to tax thresholds and different debt and financial circumstances can change these results, so it should not be taken as financial or taxation advice.

Apply for a stipend mortgage today

If you’re unsure whether the tax-free benefits you receive from your job will be accepted by the bank, call us on 1300 889 743 or complete our online enquiry form to discover whether you qualify for a stipend mortgage.

We know lenders that will accept 100% of this income so you can increase your borrowing power and buy the property you have your heart set on.