2018-07-19 Clint Howen

What Do You When Your Home Loan Comes up Short?

What Do You When Your Home Loan Comes up Short? | Hero Broker 

So you have got a home loan, but it’s not enough. You’ve used Hero Broker, gotten a home loan, but maybe just need a little more finance to really meet your goals.


You might have gotten news of your conditional approval, and then felt a little disappointed. You were maybe getting all set to raid the fridge for ice cream, and then planning to just sit on the couch drowning your sorrows in vanilla choc chip. I understand the home loan journey can be a tough one, as even in the best of times, it can have some ups and downs.


That’s why I want to detail for you now the options you have if your home loan is just a little short. To show you that all hope is not lost – and while I’m never gonna denounce a bowl of vanilla choc chip! – you can eat that ice cream with optimism, not sadness! Let’s get into it.


Get Another Job with Payslips


If you right now have a shortfall between your ideal first home price and the amount a lender will borrow, showing your lender more income on your payslips is the easiest way to make up the difference. How to get more income on your payslips? With another job! I know, I know, this isn’t an easy feat. I’ve discussed before the difficult job market we see in Australia right now.

But it’s invariably the quickest way to get more money borrowed. Once a lender sees you have extra income coming in from a consistent source, they can look anew at your borrowing power. If you only need to borrow a little more, a couple of shifts a week somewhere, or another part-time gig could get the job done.

Just keep in mind before you sign up to a side hustle that it is the income and not the job itself that matters. If you can make $250 extra a week working one shift, there’s no need to do 3 shifts.
Also be sure that you do get payslips, otherwise if its a freelance job (read: irregular income) you need to look to..


Boost Business Income Before Tax Time


Many very successful people have a job without a regular salary. This is no problem by itself, and the lender will lend to people in this circumstance. But it does make it harder to boost your home loan borrowing power as it will be based chiefly off your income seen on a tax return. If you want to increase your borrowing power, you have to produce a new tax return.


This can be a little frustrating if a financial year has just ended like it has last month, but it also allows you time to plan. There’s a number of ways a business can grow revenue over 12 months. Whether it’s seeking new clients, increasing rates, or extending trading hours.


Cut Expenses


Home loans are principally granted on income. So it’s not like your gym membership is going to be the difference between getting a $100,000 loan and a $1 million one. This said, if you’ve got a number of ongoing expenses that you really don’t use, then cutting them could help.


Things like gym memberships may seem small, but when taken together these subscriptions can eat a big chunk out of your monthly budget.  Nobody is asking you to cut Netflix and deny yourself the next season of Orange is the New Black, but any unnecessary expenses cut now could see a lender grant you a couple of thousand more.


If it’s ultimately just a couple of thousand between you and your dream home, there’s another option…


Consider Using Savings


If you have a small shortfall it’s worth keeping in mind you can buy a home with a mortgage, and using your savings on top. It is prudent to keep this conservative. Paying an extra $10,000 or $20,000 to get you into your dream home is something a lot of Aussies will be ready to do.  But few Australians buying their first home will have a lazy $100,000 lying around. Even if a couple can come up with something like that together in total savings, it’s still likely to hurt big.

Especially because your lender will have assessed your borrowing power after considering your savings. It is expected buying your home will diminish some of those savings a little, but it’s important to avoid blowing a really big hole in your bank account.  If you are buying a $610,000 home and have a loan for $600,000, then putting in $10,000 from your savings could be a good move to get your home buy over the line.

Ditto if your buying one for $700,000 and need $20,000 to get it done and dusted. But if you find the gap between your loan and the purchase price goes beyond the total cost of stamp duty – for example you have a loan for $600,000, a desired home for $650,000, and the requirement to pay $50,000 out of pocket if you want to buy it – then it’s usually best to back off. Sure, buying a home is usually a tough financial goal, but you should never buy one that will make building your wealth up elsewhere impossible. Paying out of savings for a home you can’t really afford right now is a bad move for this reason.


Earnings and Expenses Long-Term


Keep in mind once settlement has done the chief goal of the lender is to ensure you keep going with the loan. If there is a big material change – e.g. you change your main job or you and your partner sadly split up – your lender should be informed.

But if you get promoted 3 months after settlement in your new job, and then have enough money to meet the loan repayments, there’s no reason you can’t quit your second. The same applies if you have your own business. You can work Saturday’s for a year, prove a higher income, and then dial down once you have your home.

Provided you meet repayments that’s the main thing. Meantime, reach out to my team and I at Hero Broker anytime you’ve a question or need some further information.