Q. I am married with four children. My wife and I have been renting for 15 years, the last seven at no less than $250 per week and currently at $300 per week. I am a self-employed musician and my wife doesn’t work, but receives various government benefits.
We desperately want to buy our own home and, as you can see from the rent we have been paying, can afford to, but are concerned about how our situation may look on paper. Apart from obviously needing a deposit, can you please advise us on the following:
1. Do home loan lenders take rental history into account?
2. Do they consider government allowances as income?
3. Does having a guarantor add to our chances?
4. What is considered minimum income for a loan of, say, $120,000?
A. You can usually borrow approximately three to three-and-a-half times your combined income, although not all lenders will take government benefits into consideration. A number of lenders have calculators on their websites where you can plug in your income and expense details and it should determine the approximate amount that they will lend you.
Having a guarantor will certainly improve your chances, but it’s also important to prove that you will be able to service the loan and this will require some documented employment and salary history. As a self-employed musician, this may not be possible, so you may want to talk to a mortgage broker who should be able to find a lender that will take your wife’s benefits into consideration, and may also look sympathetically on the self-employed, in terms of documentation.
You haven’t told me your income, but if it has averaged high enough over the years to justify the loan you are after, there will be a lender out there who can help you – the trick will be finding one that won’t charge too high an interest rate to justify the extra risk that you present to them. Take a look at the article on specialty lenders on page 46 for a discussion on lenders who cater to borrowers such as yourself.