Non-applicant spouse that is self-employed (UPDATE)

dant · Oct 09, 2012 4:36 pm

Hi,
I started a small business for my wife in April. She operates as a sole trader and is averaging approx $1,950 per month net. I understand this cannot be counted due to the short history.

Looking at the Genworth Servicing Calculator, if I remove her from the application and include our 4 kids, then based on my income we can obtain more than required. Including her as part of a 'couple' increases our expenses too much and I cannot borrow enough and her income won't be included.

My question is:
Will her short trading history be sufficient to make her a non-applicant spouse and allow her to be excluded in the expense calculations (as her income - albeit a short history - covers her living expenses)?

With my wife as part of a couple living expenses are: $44,044
With my wife excluded our living expenses change to: $32,604

My income services those living expenses and the loan amount. I found the following on the Genworth site:

5.7.5 Single Borrower with Non-applicant Spouse
For a married person who is the sole applicant on a loan, the Genworth notional living costs for a couple will be applied unless independent income for the non applicant spouse can be evidenced by the most recent pay slip.

The issues are her less than 2 yrs trading history and she does not have a payslip as she is a sole trader and just invoices. Will they still take her income into account not for servicing but as evidence to allow me to apply as a single under the clause above?

Thanks in advance,
dant

shape · Oct 09, 2012 8:39 pm

Your research is partly correct.

Under a STANDARD full doc loan she does need to supply 2 years worth of stable tax returns; however there are one exceptions.
- If she service one client only and it's more of a"contract" based role, the lender can take this as a PAYG income as long as she has a long term contact in place, this is common practice for the IT, Medical and Educational industry- This is not considered a "true" self employed...

----

Some points to consider.

1. The lender will still include your wife's living expense into the calculations even if she is not included into the mortgage docs.

2. If she is a "true" self employed, then yes she does need to have 2 years worth of stable tax returns, however have you considered the low doc loan option?

As long as she had her abn for more then 6 month and she has good trading history + BAS ( optional) then a low doc loan may be more suitable...even if it's a construction loan.

Rates for low doc can be slightly more expensive ~ 5.59 - 8.20% depending on LVR, industry, trading history and lender- but given the situation and risk, it makes sense.

http://www.shapehomeloans.com.au/low-doc-rates

Regards
Michael

andystar70 · Oct 09, 2012 8:58 pm

shape - since you're obviously here looking for business, shouldn't you have an "Advertiser" account?

shape · Oct 09, 2012 9:07 pm

andystar70

shape - since you're obviously here looking for business, shouldn't you have an "Advertiser" account?

Im here to help, yes my company's details are supplied, but as you can see from all my post; im open to give out advice freely. I leave my company's details open so that posters can see it's not coming from a random source...or as some would like too call a "troll".

I been told by homeone it's ok to leave my details here as i have reached the min number of post required. however if this has changed and it's now homeone rules to remove my company's details, i will be more happy to oblige and yes i will still post and answer as required.

Regards
Michael

dant · Oct 10, 2012 6:42 am

Thanks for the reply - appreciated.

It's a little confusing as some of the online calculators still indicate I could get what I need (not the generic subscription ones some lenders use). I thought the Genworth calculator would be the hardest to satisfy and when I saw that policy assumed we could use that to exclude my wife.

Lo-doc is not an option as we don't have a 20% deposit. That will take us at least until the end of next year and if we go until then we may as well wait until April 2014 when lenders will count all her income and be done with it. It is annoying because in reality we can pretty easily service $900-$1,000 per week without any negative impact on lifestyle.

Cheers,
dant

shape · Oct 10, 2012 8:51 am

Genworth calculator is by far the best "online" calculator to use, as it's the most accurate and up to date.

However serviceability does vary lender too lender.
Genworth uses $44,044 for 1 couple and 4 kids as their standard living expense.

While lenders will use anything between $34,520 - $48,000+

Example: ANZ's one is $39,996.

So don't get your hopes up! Where there's a Will there's a way.

Regards
Michael

Always Scheming · Oct 30, 2012 5:31 pm

I find it interesting that you think its plausible to not include you wife on your application, like she doesn't exist. As she lives with you I don't see how its even an option to not include her, she is a dependent as far as the application is concerned. That being said put the full story forward and I'm sure there will be a lender out there who will lend you the money, at the end of the day banks are in the business of lending people money to people who can actually afford to repay it, if this is you then you should be fine. With that said you may find it easier to go to a broker who will direct you to the best lender for your income situation.

DeanandKerry · Oct 30, 2012 6:23 pm

Before you got married, leaving your partner off the application could have worked (we did this when one of us was working casually).

I also know people who have given self-employed or contracting roles serious consideration, only to stay on as an employee because it would otherwise mess up a planned loan application.

Getting divorced until you get a loan could be an option?

, but hopefully a broker will probably be able to find a lender for you.

jkelleher01 · Feb 24, 2013 6:18 pm

Personally the broker path did not work out well for me, maybe my "choice" was wrong.

However, for whatever reason, my local bank manager at a branch of one of the big 4 (which happens to be in melbourne cbd, so I am not one of 20 people that live and work in 1 town out in the bush!) seemed to think that I had come into the branch often enough to remeber my name, guess my occupation from the clothes I was wearing once 6 months ago, and from the time I had asked about a credit card.

I explained the situation I was in at the time and she found solutions for me, then later when I began building, I went to her again and she was able to solve every problem that came up, as obviously the do and will!

It must be said that I had also visited competitors and they proved to be just as helpful. Banks more than ever before are willing to do what they can for you business, especially now the laws have changed and you can exercise your right to walk, and go to who ever is offering the best rate for your situation.

I say take the time to do it yourself, see what rates are advertised, actually go into the banks and talk to their lending managers, and you might be pleasantly surprised at the deal you can strike.

And remember these days keep an eye on what everyone is offering, it's as easy as changing your insurance provider to change lender!

plc · Feb 25, 2013 2:11 am

jkelleher01

And remember these days keep an eye on what everyone is offering, it's as easy as changing your insurance provider to change lender!

Don't tell me you have been fooled by the spin that Swan dribbles out of his mouth when he repeatedly claims it easy to change lenders? I suppose it is if you're willing to pay for it. What they have done with the new laws is stop the exit fee that lenders charged when loans were terminated in the first few years. However you still have to pay:

- lender discharge fee which will be around the $300-$400 mark
- discharge of mortgage and registration of mortgage approx. $200
- new application fee, valuation which ranges from $0 - $600
- if your loan is above 80%, you will hit for LMI with the new lender which could be thousands.
- if you are on fixed rates and decide to change, you might be hit with break fees which could be thousands.

So if you're deciding to change lenders every 6 months to "save" that extra $50/month, you really are in for a big surprise.

There might be a case here and there where it might actually opportune to switch lenders, but they are in the minority. It is not as easy as you or Swan suggest.

Cheers

Tom

jkelleher01 · Feb 25, 2013 8:39 am

I wouldn't beleive what he would tell me about his nearest and dearest grandmother.
despite that, the fact that you can change lender should be motivation enough for your current lender to beat the rate that you can get elsewhere, Mine did.

Obviously everyone on here will have a different financial situation, and you would not change if it will cost more in the long run, but if you are under 80% or going to save thousands, I would say your mad not to pick up the phone and ask.

plc · Feb 25, 2013 2:01 pm

jkelleher01

I wouldn't beleive what he would tell me about his nearest and dearest grandmother.
despite that, the fact that you can change lender should be motivation enough for your current lender to beat the rate that you can get elsewhere, Mine did.

Obviously everyone on here will have a different financial situation, and you would not change if it will cost more in the long run, but if you are under 80% or going to save thousands, I would say your mad not to pick up the phone and ask.

At least we agree on something.

Sure, your lender might be able to drop the rate 0.1 or 0.2 percent if you ask them, but they know from your situation if you're a likely candidate who can walk out on them. They aren't stupid.

The majority of the people who are the ones that are struggling with repayments are your first home buyers, and people who have committed themselves too much and by nature are at 90% - 95% LVR's. These are the ones who would benefit the most from changing lenders but can't because it will cost them too much.

There's a reason Swan doesn't go into further detail on his "walk down the road to another lender" statement because he know if he gets scrutinised he will get slaughtered.

All I'm saying is that yes, it's beneficial to have a look and do the numbers and see what can be done, but it's not as easy as changing lenders as you make it out to be due to the fact it isn't feasible.

Cheers

Tom

dant · Aug 02, 2013 1:55 pm

Just a quick update.

We actually got a loan approved using my wife's 1 year tax return for the business with our bank.

I called up towards the end of the FY and was asking various questions and they said to apply. We have banked with them for some time and they had the account history on our savings etc. I provided them with a very detailed budget showing we spend probably less than the average 6 person family but was able to corroborate this with our actual savings history. It also really helped that our rent of $550 per week is not that much less than what we will actually have to pay.

We were just over the 80% lend level but they are able to sneak through deals with the LMI insurer that they use if they are satisifed with the application.

A good result in the end and happy to see some common sense prevail with assessment.
cheers,
dant

jb_money · Aug 05, 2013 7:17 pm

Congratulations!!! That is great news Dant.

Commonsense lending is hard to come by these days. However it seems like you found one of them which can accept one year financials and make exceptions because you are an existing customer with them.

Sometimes being an existing customer has strong merits to help you achieve difficult loan approval where most banks will not. As the loan is just over 80% LVR, it seems like the bank is able to approve the loan within their own DUA.

Once again congratulations and good luck with the rest of the loan.