Can anyone give me some advice on how banks view investors reducing paid salary wages to p/t, or casual-if by doing so,they will be bringing in the same “after tax” income (b/c it would drop me into a lower wage bracket,there by reduce taxes..) as if i was still working f/t, for future i.p. loans? Not sure if i’ve worded this ok. I am worried that if i reduce my hours at work (& DESPERATLY want to) that even tho i will end up by the end of the year,earning the same after tax dollars,that it will not be looked favourably upon for future loans. How do you guys that have many i.p’s,& arent working f/t,convince the bank you are “worthy”????
Misty-ery!
P.S. I think we need 2 more icons.One that shows a qu mark over “do-do’s” head (i would hv used that!) & one with a light bulb for “great ideas”!Hi Misty,
Lenders tend to work on gross income levels, but this does vary. A good broker should be able to get you over the serviceability line if they have a good relationship with the various lenders the work with.
If not, there are number of lenders who also include lo doc and no doc loans in their product range so these may be available to you, albeit often at a slightly higher interest rate.
Derek
[email protected]Property Investment Support Available. Ongoing and never stopping. PM welcome.
If you are going to reduce your work hours, permanent part time would be better as lenders view it as more stable. Also most lenders tend to worry about borrowers being too rental reliant – tho I have yet to hear a good definition of this. So it would be best to stay working full time as long as possible!
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Misty,
Please let me know how you can reduce your hours and yet get the same amount of income. Even bracket creep (or the inverse- bracket return??) is not gonna have you working less hours but taking home the same amount of pay.
kay henry
I think Misty is saying that her hourly rate will increase when she shifts from full time to part time employment. The thing to bear in mind is that p/t wages are usually higher to compensate for a) lack of security b) lack of oncosts such as holiday pay etc. Is worth weighing up… I quite liked temping in my accountant days and found that in most contracts you had to ask to eventually leave rather than vice versa.
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Well, I guess I thought that the income earned would be less- lower tax bracket etc? Sounds like it.
If a person earned $25 an hour @ 40 hours a week, but then changed that to $50 an hour @ 20 hours a week (thereby actually earning the same amount), I am sure the bank would have no issue with it- as long as the new arrangement was the same as the old- eg, the job was still permanent.
Of course, any loss of income is gonna change the way the bank views you- the less you earn, the more scrutiny your mortgage is going to be under. Watch out for the position of your existing loan too, if you reduce your income.
kay henry
Thanx so much 4 the feedback.All taken on board.
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