A gifted deposit, four income sources and one approval
A gifted deposit and income from four separate sources are two of the things lenders scrutinise hardest. Finance Craft got a $1.05 million purchase approved with both, on a contract that was already signed. Half a million dollars of the deposit came from family, and not one of the four income streams was a straightforward full time salary.
The situation
The clients were a couple with two young children. They had found the home they wanted, a $1.05 million purchase, and had already signed the contract. What they needed from me was the finance to stand up behind it.
On the deposit side they were in a strong position. A $507,000 gift from family, combined with their own savings, covered the $545,000 needed to complete. That left a loan of $550,000 against a $1.05 million property, an LVR of 53% and no lenders mortgage insurance anywhere in the structure. On paper this should have been one of the easier files of the year.
The deposit was never the issue. The income was.
The sticking point
Between the two of them, money arrived from four separate places, and not one of those places was a normal full time salary with a payslip to match.
One borrower held two part time PAYG jobs, and also held a minority stake in a small business that paid no wage at all. Their return from that business came as trust distributions. The other borrower worked full time inside that same business, which in lender language makes them a family employee. That matters, because when a business owned by your family pays you a wage, an assessor cannot take the stated figure at face value the way they would a wage from an unrelated employer.
The business itself had traded two full financial years, but the most recent return had not been lodged. Standard self-employed policy wants two lodged years, so on the ordinary path this file could not be assessed at all until the accountant finished.
Then there was the car loan. The business had financed a vehicle, and the borrowers had personally guaranteed that loan. Because they were guarantors, the debt appeared on their personal credit file. A lender's default treatment is to count the full repayment against their personal borrowing capacity, even though the business was the one making the payments. Left unaddressed, they would have been assessed as though they were personally servicing a debt they never actually pay.
With a contract already signed, there was no version of this where we waited for the paperwork to get simpler.
What I did
Chose the lender around the missing return. I placed the file with a lender whose policy allows a one year self-employed assessment where the business has traded long enough. That single policy choice removed the unlodged return as an obstacle, rather than us waiting months for the accountant.
Assessed the family employee conservatively. For the borrower on the family business wage, I used the figure on their ATO income statement rather than the higher salary they could have stated. It produced a lower income for servicing, but it was independently verifiable, and it meant the assessor had nothing to push back on. A number a credit officer can check themselves is worth more than a bigger number they have to take on trust.
Dealt with the guaranteed car loan before it became a question. Rather than let it surface mid-assessment, I evidenced it up front. The business bank statements showed the repayments coming out of business income, and the liability sat in the business accounts where it belonged. On that basis the lender excluded the repayment from the couple's personal servicing assessment. The debt still exists and they are still guarantors, but it is no longer double counted against them personally.
Declared living expenses honestly, and high. Lenders assess your living costs at the higher of what you declare or their own benchmark figure. We declared well above that benchmark, because with two children in childcare their actual costs genuinely are higher than a standard household of four. Understating expenses is the fastest way to have a file unravel, since the assessor reads your bank statements anyway. Declaring the real number and still showing a surplus is a far stronger position than declaring a flattering one and getting caught.
The result
Approved. A $550,000 loan on a two year fixed rate, principal and interest, with $1,600 a month of surplus left in the servicing assessment even after the higher declared expenses.
The point worth taking from this one is that none of those four income sources was a problem by itself. Part time work, trust distributions, a family business wage and a guaranteed business debt are all things lenders will accept. They become a problem when they land on an assessor's desk without an explanation attached, because the assessor's only safe move is to assume the worst reading of each one.
The three policies that made this work
Gifted deposits. Most lenders accept a gift from immediate family, including one that covers the entire deposit. What they want is a signed gift letter or statutory declaration confirming the money is not repayable, and evidence of the funds actually landing in your account. Where lenders differ is on whether they also require genuine savings of your own alongside the gift, and that difference is often what decides which lender gets the file.
One year assessments. Standard self-employed policy wants two lodged years of tax returns. Some lenders will work from a single year where the business has traded long enough and the figures are clean. When a business has completed two financial years but the accountant has not finished the latest return, this is the policy that turns a months long wait into an application you can lodge now.
Guaranteed business debt. If you have personally guaranteed a loan the business took out, that debt shows on your personal credit file, and the lender's starting assumption is that the repayment counts against you. Most lenders will exclude it from your personal servicing where you can show the business is genuinely paying it, usually through business bank statements showing the repayments and the liability appearing in the business accounts. The important part is timing. Put that evidence in the file at lodgement and it is a non-event. Leave it out and it comes back as a query halfway through the assessment, which costs you days you may not have on a signed contract.
Gifted deposits and complex income, answered
Most lenders accept a gift from an immediate family member, and many will accept the full deposit as a gift. They will want a signed statutory declaration or gift letter confirming the money is a gift and not repayable, evidence of the funds landing in your account, and in some cases proof of where the giver's money came from. Policies vary on whether genuine savings are also required, which is usually the deciding factor in lender choice.
Some lenders will assess self-employed income on a single year of returns where the business has been trading long enough and the figures are clean. It is often called a one year assessment. It matters when a business has traded two full financial years but the most recent return has not been lodged yet, because it avoids waiting months for the accountant to finish.
It can, and it will almost always show on your credit file as a commercial enquiry that needs explaining. Where the debt sits in the business, is serviced by the business and is evidenced in the business accounts, most lenders will exclude it from your personal assessment. The explanation and the supporting documents have to be in the file from the start, otherwise it comes back as a question mid-assessment and slows everything down.
Income that does not fit a payslip?
Multiple jobs, trust distributions, a family business wage. Tell Shane Howley, a mortgage broker based in Coogee, how you actually earn and he'll find the lender that assesses it properly. More on how self-employed and family business income is assessed.
This case study describes a real loan I arranged, anonymised. Every situation is different and past results are not a guarantee of what a lender will approve for you. The information on this page is general in nature and does not take your objectives, financial situation or needs into account. See my disclaimer for more.