Let’s talk income!
Choosing the right lender can make a bigger difference than most people realise, especially when you’re buying your first home or stepping into your first investment.
It’s not just about getting approved. It’s about setting yourself up properly from the start. A good lender can maximise your borrowing power…..or should I say the ‘right lender’
Different banks assess income, expenses, overtime, bonuses, and even rental income in completely different ways. The right choice can mean the difference between scraping into a property, missing out altogether or comfortably affording one that actually suits your goals.
One of the biggest questions I get is: “Dan, how much can I borrow?”
So to help you out, here are 5 key things that shape your borrowing capacity:
Your income
This includes your base salary, overtime, allowances, and any secondary income. The more stable and consistent it is, the better. Full-time and part-time income is generally viewed more favourably than casual, unless your casual hours are consistent.
Overtime
Some lenders will shade your overtime by 20% if you are not in an essential role like police or nursing. For example, if you earn $10,000 in overtime, some lenders may only use $8,000.
That might not sound like much, but it can reduce your borrowing power by $40K to $50K.
Secondary income
If you have a second job, lenders may cap the number of hours they will accept. For example, you might work 38 hours full-time and another 30 hours elsewhere. Some lenders will cap this at 60 hours, while others will allow the full 68.
This comes down to how each lender views sustainability, some will say anything over 60hrs is ‘not sustainable’ and this will reduce your borrowing amount.
Casual income
Casual income is acceptable, but lenders calculate it differently. Some will average your last six months of income and annualise it over 48 weeks, while others use 52 weeks.
This can make a big difference to how much you can borrow, especially if you are a couple and the primary income earner is casual.
Length of employment
This is often overlooked. Some lenders are happy with just one payslip in a new full-time or part-time role, while others want to see you employed for three months.
If you’re thinking about changing jobs and buying, it’s worth having a quick chat first so you don’t slow yourself down.
Bonus income
Bonuses are treated very differently. Some lenders will accept just one year, while others will require two years and average it.
If you’ve had a recent bonus (that was strong), the right lender can make a big difference to your borrowing capacity.
Final thought
The right lender can help you move forward sooner instead of waiting unnecessarily. It all comes down to your specific income, job, and situation.
All lenders are like Cinderella’s glass slipper. Your income is the foot, and every lender tries to fit it differently. Some squeeze it, some won’t accept it, but the right lender is the one where it fits just right… and that’s what unlocks the door to your home…..I am sorry for comparing Cinderella’s foot and a property!
Hope this helps members!
