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Getting a mortgage with a large family & one income.


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#1 TotoroIsMyFriend

Posted 13 June 2019 - 04:37 PM

Back story; our last mortgage was when we had only two kids and two incomes.  We got it really easy, they practically threw the money at us.
Twelve years later we'd like to borrow again, however we now have six kids and one income.  That income is over 100 grand though, which is pretty much what we had combined with the first mortgage.  
This time we only want to borrow about 280,000.  

Do we have anyone here that may have navigated their way through the same situation?

We have yet to actually apply for the loan, as we are still trying to save a bigger deposit, we have 20,000 so far.  If we buy a block of land (which around here will only cost about 70,000) we have a big enough deposit already, but how will that work later when it comes to build time. Does the land count as the deposit?  There is no handbook on this kind of thing that doesn't have an agenda, so I'm a bit lost with this decision.
Any advice appreciated greatly!

#2 Mollyksy

Posted 13 June 2019 - 04:50 PM

I'd suggest asking around for a recommendation on a good mortgage broker. They'll know the ins and outs, especially in this current climate. Good luck! I so admire you with six kids! I'd love to in a different life. This current one, one DS is enough for this single mum!

#3 Froggilicious

Posted 13 June 2019 - 04:54 PM

When we were planing a build they combined the total (expected) value of the house and land. Our deposit needed to be 20% of that, so because by the time came to start building the land was mostly paid off we were able to borrow everything we needed to build. If we had less equity in the land we would have had to contribute extra money for the build.

#4 newmumandexcited

Posted 13 June 2019 - 05:03 PM

Can I be honest, why would you want to?

I suppose I feel this lingering sense of uncertainty in the economy so I’m basing it unfairly on that, but I guess if it’s judged as high risk well is it worth it?

Though I am definitely no expert.

#5 TotoroIsMyFriend

Posted 13 June 2019 - 05:18 PM

View Postnewmumandexcited, on 13 June 2019 - 05:03 PM, said:

Can I be honest, why would you want to?

I suppose I feel this lingering sense of uncertainty in the economy so I’m basing it unfairly on that, but I guess if it’s judged as high risk well is it worth it?

Though I am definitely no expert.

Because rents in this town are 470 a week.  
A mortgage would cost us less.

#6 TotoroIsMyFriend

Posted 13 June 2019 - 05:20 PM

View PostFroggilicious, on 13 June 2019 - 04:54 PM, said:

When we were planing a build they combined the total (expected) value of the house and land. Our deposit needed to be 20% of that, so because by the time came to start building the land was mostly paid off we were able to borrow everything we needed to build. If we had less equity in the land we would have had to contribute extra money for the build.

This makes a lot of sense and was what I was hoping was the go.  Thanks. I think we can make a lot of headway on paying off the land quickly too.

#7 newmumandexcited

Posted 13 June 2019 - 06:50 PM

View PostTotoroIsMyFriend, on 13 June 2019 - 05:18 PM, said:



Because rents in this town are 470 a week.  
A mortgage would cost us less.

That makes sense, I assumed you lived in the place you had a loan for. I live in a hca too and the rent strain is very real.

#8 FeralZombieMum

Posted 13 June 2019 - 07:36 PM

Have you tried the online bank calculators with your details, to see what you could borrow?

https://www.nab.com....wing-calculator

https://www.commbank...ch-can-i-borrow

View PostTotoroIsMyFriend, on 13 June 2019 - 04:37 PM, said:

We have yet to actually apply for the loan, as we are still trying to save a bigger deposit, we have 20,000 so far.  If we buy a block of land (which around here will only cost about 70,000) we have a big enough deposit already, but how will that work later when it comes to build time. Does the land count as the deposit?  There is no handbook on this kind of thing that doesn't have an agenda, so I'm a bit lost with this decision.
Any advice appreciated greatly!

We had to pay a deposit for the land and another deposit to the builder months later. Banks will look at what deposit you have saved up, or what equity you have. You want to find out at the start if you'll be able to get a loan for the land as well as the build. You'd want a 20% deposit to avoid lenders mortgage insurance. You will also need to add in other costs like stamp duty.

Banks also look at serviceability  - which might be difficult with 6 kids and only 1 income. Banks will examine your weekly expenses - so you might want to cut back at spending for the next 6 months. If you had 2 incomes - even if that 2nd income is only part time, it can make a huge difference to what banks are willing to lend.

You may have to add extra expenses to your house build - like driveway, window furnishings etc. You could be looking at another $50,000 - $100,000 for extras.

#9 jayskette

Posted 14 June 2019 - 08:22 AM

Definitely get a good broker as my income and loan amount is very similar to yours but I have no kids.

#10 born.a.girl

Posted 14 June 2019 - 09:12 AM

Can I ask what happened with your first mortgage?  You may find that info is still on your records, and may have an impact.

Rents in some places are bizarre, I hope you're able to get your loan.


I definitely wouldn't consider the variability in housing prices a negative - if you pay off a home loan before retirement, it will make a massive difference to your lifestyle from then on.

Housing prices have always fluctuated, it's just that it's been so long since we've had a significant drop (and it's often very area dependent) that it's off-putting for those who've never lived through one.

#11 Quick hedgehog

Posted 14 June 2019 - 09:30 AM

Find yourself a good  broker. We have 2 kids and a single income of around $150,000. we want to buy an $800,000 house and will have a $600,000 deposit and no debt.
.
I couldn't find a bank to touch us  but when we got in touch wtih the broker who helped us with a previous house purchase 15 years ago,  she has been able to find several lenders.

Interestingly, there are lenders who will lend us double what we need and yet others who won't touch us with a barge pole.

A good broker is worth their weight in gold

#12 just2ofus

Posted 14 June 2019 - 09:44 AM

Echoing a good broker.

I am a single parent, income $80k plus child support - bank originally rejected my application, broker went through my financials with a fine tooth comb, resubmitted directly to their relationship manger and it got approved.

My broker is worth his weight in gold.

#13 Wahwah

Posted 14 June 2019 - 09:48 AM

View PostQuick hedgehog, on 14 June 2019 - 09:30 AM, said:

Find yourself a good  broker. We have 2 kids and a single income of around $150,000. we want to buy an $800,000 house and will have a $600,000 deposit and no debt.
.
I couldn't find a bank to touch us  but when we got in touch wtih the broker who helped us with a previous house purchase 15 years ago,  she has been able to find several lenders.

Interestingly, there are lenders who will lend us double what we need and yet others who won't touch us with a barge pole.

A good broker is worth their weight in gold

I'm really curious QH...why were you rejected if you had a 75% deposit and your loan amount was only going to be about x1.3 your income? Asking because I imagine we'll be in a similar situation in the future if we want to upgrade.

#14 AprilEthereal

Posted 14 June 2019 - 10:01 AM

View PostTotoroIsMyFriend, on 13 June 2019 - 05:18 PM, said:

Because rents in this town are 470 a week.  
A mortgage would cost us less.

It doesn't work like that, what if interest rates go up?

I would seek out a highly recommended mortgage broker.   Cost of living/living expenses is the biggest challenge these days.
Good luck.

#15 CallMeFeral

Posted 14 June 2019 - 10:15 AM

View PostAprilEthereal, on 14 June 2019 - 10:01 AM, said:

It doesn't work like that, what if interest rates go up?

It does work like that, rents can go up too.
And interest rates would have to go up a pretty gigantic whack on a $280k loan to reach that amount a week.

#16 Bam1

Posted 14 June 2019 - 01:58 PM

View PostFeralZombieMum, on 13 June 2019 - 07:36 PM, said:

Have you tried the online bank calculators with your details, to see what you could borrow?

https://www.nab.com....wing-calculator

https://www.commbank...ch-can-i-borrow

Borrwing capacity calculators are a crock - you may be able to afford the repayment based on interest rate, income and existing debts, but the bank will only lend you the amount as determined by their servicing guidelines which will include minimums for rates, living expense, adds a buffer on any existing repayments and assesses most incomes other than salary at a reduced value.  So the calculators have you able to repay a $500k loan but the bank will only actually lend you $300k (and the difference may be even higher)

#17 FeralZombieMum

Posted 15 June 2019 - 10:43 AM

View PostBam1, on 14 June 2019 - 01:58 PM, said:

Borrwing capacity calculators are a crock - you may be able to afford the repayment based on interest rate, income and existing debts, but the bank will only lend you the amount as determined by their servicing guidelines which will include minimums for rates, living expense, adds a buffer on any existing repayments and assesses most incomes other than salary at a reduced value.  So the calculators have you able to repay a $500k loan but the bank will only actually lend you $300k (and the difference may be even higher)

They were pretty accurate when I used them last year. I tried a few out and they all came out with similar amounts. I used them a couple of years earlier when we were first looking at building, and used it as a guide on what to aim for in regards to income and expenses.

Last year we went through the credit application twice with the bank - first for the land, second for the build. I played around a bit with what we could borrow, using different online calculators, and using different monthly expense amounts & different income amounts - in my experience they were very spot on.

Using our actual details, it showed us how much we could potentially borrow, and when we chatted to the bank, using our details in their calculations, we met the initial requirements to be able to afford the home loan we wanted.

#18 MrsLexiK

Posted 15 June 2019 - 11:27 AM

Admittedly this was a few years ago. But for us the one income was an issue when applying. When I applied on my own we had no issue (but would have had DH also been on the loan). As we were married second time with a child our income had increased but I was on mat leave, it was before the bank royal commission so they submitted my PAYG statement from previous year (we were borrowing for a business loan so also different criteria) but all the banks I spoke to said even though DH’s income was more then my income when I got the loan on my own he was seen as having two dependents and so we likely wouldn’t qualify if we both made that income then we had a better chance of getting it.

#19 Quick hedgehog

Posted 15 June 2019 - 12:00 PM

Quote

I'm really curious QH...why were you rejected if you had a 75% deposit and your loan amount was only going to be about x1.3 your income?


I believe it is because of the single income.

I am very risk averse, so I have very thoroughly done my sums and I know my budget down to the last $100.  I calculated we could afford repayments on the loan we wanted even if interest rates went up to over 8% and that was without having to do any belt tightening.  

I don't know what calculations the banks do, but they don't see us as a good risk even though we have no credit cards and no other debt. Even the bank that we have 2 paid off mortgages with wouldn't lend us more than $100,000

Edited by Quick hedgehog, 15 June 2019 - 12:01 PM.


#20 Daffy2016

Posted 15 June 2019 - 12:14 PM

Affordability requirements have also just changed and are tighter than they were. Definitely go to a broker and be completely upfront and transparent about all your expenses and earnings - it’s amazing what some people will ‘forget’ to mention that gets turned up when the banks do their new checks.

Good luck!

#21 aprilrainatxmas

Posted 15 June 2019 - 12:38 PM

We have just refin

View PostWahwah, on 14 June 2019 - 09:48 AM, said:

I'm really curious QH...why were you rejected if you had a 75% deposit and your loan amount was only going to be about x1.3 your income? Asking because I imagine we'll be in a similar situation in the future if we want to upgrade.

We have just refinanced, with a broker.  Our problem was our age with Suncorp who would only do a shorter loan, I think until retirement age so went with NAB. (DH is 56)

I'd say this will be a problem later for families with older parents. Life  and income protection insurance and bank loans are all massively effected by age.

#22 Bam1

Posted 15 June 2019 - 01:00 PM

View PostFeralZombieMum, on 15 June 2019 - 10:43 AM, said:


They were pretty accurate when I used them last year. I tried a few out and they all came out with similar amounts. I used them a couple of years earlier when we were first looking at building, and used it as a guide on what to aim for in regards to income and expenses.

Last year we went through the credit application twice with the bank - first for the land, second for the build. I played around a bit with what we could borrow, using different online calculators, and using different monthly expense amounts & different income amounts - in my experience they were very spot on.

Using our actual details, it showed us how much we could potentially borrow, and when we chatted to the bank, using our details in their calculations, we met the initial requirements to be able to afford the home loan we wanted.

Simple scenarios maybe but they are the banks version of parents with prams, they are for marketing, the banks that know they have the tightest serviceability ensure that their borrowing capacity is looser than other banks as the average person wont know that borrowing capacity has a different definition than maximum loan amount (what serviceability calculations use). It gets people in the door and the wheeling and dealing can begin. In the end they end up paying more than a bank with a lower borrowing capacity.

#23 just roses

Posted 15 June 2019 - 01:07 PM

View PostTotoroIsMyFriend, on 13 June 2019 - 05:18 PM, said:



Because rents in this town are 470 a week.  
A mortgage would cost us less.
Have you accounted for insurance, rates and maintenance in your budget. For us, the former two comes to about $7k a year, or $135 a week. Maintenance can easily come to $3k a year, so then you’re looking at an extra of $200 ish a week. So your mortgage payment would need to be $250 a week or less in order for it to be cheaper than current rent.

Edited by just roses, 15 June 2019 - 01:53 PM.


#24 But seriously

Posted 15 June 2019 - 01:58 PM

Another asking what happened to your first mortgage?

#25 It's Percy

Posted 15 June 2019 - 01:59 PM

View PostQuick hedgehog, on 15 June 2019 - 12:00 PM, said:

I believe it is because of the single income.


This was our issue too - we wanted to borrow about $200k for a property worth $1.35m and had issues with banks. Ended up with a broker and had no issues after that.

OP - times have changed. The banking royal commission and changes to legislation means mortgages are not so easy to come by these days.




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