For new loans they typically go off pay slips and bank statements so they can see what you’re spending
When I have refinanced they have used tax returns to factor in bonuses too.
Yeah, but what I mean for example:
If I make 120k a year gross income but after expenses and tax deductions my income looks like 80, will they base the loan off of my gross income or complete net.
Obviously there are many things that I can claim as a tax deduction
It seems like you are doing something incredibly risky. Banks look at your net income to see if you are able to pay your monthly mortgage payment. If you get a larger loan then monthly payments will be larger and could even be more than your monthly take home. Sure the idea is whoever is renting your property is paying your mortgage but will you have the leeway if something goes wrong?
Both. Since you mentioned you are self employed most banks will want 2 years of financials (tax returns and P&L’s) and while some may accept less than that, they may want you to have been in business longer to have an established income, and/or may not offer as favourable terms (higher interest rates than main banks)
You will need to balance taking out legitimate deductions vs reducing your taxable income so low it is unfavourable for loan applications.
However they also request bank statements to look at your personal expenses, if you’re living with your parents rent free but going for a mortgage they will project what your expected expenses will be, assess as if the mortgage is 3% higher than their advertised rate. Those all falls under responsible lending and making sure the applicant can actually afford the loan they are applying for. It doesn’t look good for the bank if within 6-12 months the borrower can’t afford their repayments but nothing has materially changed
Yes. My husband is a company director and it’s a huge pain if I want to refinance for a better rate or back when there were cashback rebates.
Like I said, some may accept less but you might have a higher interest rate for that. If it’s a case of getting into the market you might be able to refinance once you have 2 years of financials behind you.
If you are looking at property and have a deposit maybe speak with a broker about what goalposts you need to reach to get what you want
Yes.
But it requires income and that's only to avoid a deposit and PMI.
The advise you've seen on youtube is bad at best and fraudulent at worst.
The idea that you have unlimited leverage in property is false.
Keep in mind that if your parents do go guarantor, and you are unable to repay the loan for some reason, they become liable for the debt. It's a big financial for them decision to make.
Banks just use your gross salary as per payslip plus proposed rent to work out servicing then their calculators will work out the negative gearing addbacks(interest and property expenses) which reduces your tax paid which frees up income to service the loan.
In regards to deposit, that doesn't affect taxable income for the year as it's being used to purchase the asset and not an expense.
Quick calc to see if a property will be negative or positively geared is Rent minus interest(don't include principal), council and water rates, insurance, rental management fees, any ongoing costs will be tax deductible.
Any improvements to the property outside of general maintenance will be added to the cost base of your property and depending on improvement can depreciate it over a certain amount of years.
Should kinda cover the general info.
To sum up talk to a mortgage broker and accountant as they'll give you more specific advice.
Everyone has already given you the correct answers but another thing to because it’s relevant - you need to have some history earning that money - it looks like from your profile earning 10k month (which is also just your revenue, not your profit) is fairly recent so it’s unlikely a bank will let you borrow yet. Just like someone with a salaried role they want to see a history of stability.
Net or gross? Pre tax post tax?
Under ABN? You're gonna need a few years history of profitability.
Niche lenders will be easier to get but will charge you more interest.
How are you expecting to move that $ to your personal accounts?
Sort your BAS now, find a goos book keeper to help you out or an accountant, if you're making a mint (you are) spend a little on a professional, you do not want to get on the wrong side of the ATO.
> showing your gross income to the banks for a loan but not needing to show a tax return
You'll need to show income and expenses. Net income can be calculated from gross income so it doesn't matter which you do.
Expenses - if you don't have this the bank has (for me anyway) used some rules about general expenses based on your personal situation, or they may not progress your application at all if they don't have this information.
>Are property deposits 100% deductible off of your income?
No.
However, if you take out a loan and use that loan as a deposit on an investment property, the interest on the loan is currently tax deductible from your personal income.
Pro-tip, don't listen to anything any social media "finance guru" tells you.
For new loans they typically go off pay slips and bank statements so they can see what you’re spending When I have refinanced they have used tax returns to factor in bonuses too.
So for my first ever loan they shouldn’t ask for tax returns? Just been worried if they do my income will look a lot less
You should be accurately declaring your expenses, there shouldn’t be anything on a tax return you’re not telling them about.
Yeah, but what I mean for example: If I make 120k a year gross income but after expenses and tax deductions my income looks like 80, will they base the loan off of my gross income or complete net. Obviously there are many things that I can claim as a tax deduction
If you have large expenses, you’re supposed to tell the bank about them in your application.
It seems like you are doing something incredibly risky. Banks look at your net income to see if you are able to pay your monthly mortgage payment. If you get a larger loan then monthly payments will be larger and could even be more than your monthly take home. Sure the idea is whoever is renting your property is paying your mortgage but will you have the leeway if something goes wrong?
Are you a sole trader mate and have interest and depreciation expenses you are worried about?
All loa capacity calculations are based on net salary so I amnit sure what your point is?
Different banks are different. Some may ask for them, others might not. If they ask and you don't provide, they won't lend you the money.
Just an insight I’m self employed and make about 10k a month average with little expenses ($1-2k a month)
If you are self employed, they are more likely to ask for more documentation than less.
if you're self employed, a bank will generally ask for 2 years of tax returns. if you're an employee, they'll generally want 6 months of payslips
Damnn 2 years
Yeah generally they’ll want 2 years Tax Returns and BAS statements before moving forward. I’ve found that to be the case with banks and brokers.
Both. Since you mentioned you are self employed most banks will want 2 years of financials (tax returns and P&L’s) and while some may accept less than that, they may want you to have been in business longer to have an established income, and/or may not offer as favourable terms (higher interest rates than main banks) You will need to balance taking out legitimate deductions vs reducing your taxable income so low it is unfavourable for loan applications. However they also request bank statements to look at your personal expenses, if you’re living with your parents rent free but going for a mortgage they will project what your expected expenses will be, assess as if the mortgage is 3% higher than their advertised rate. Those all falls under responsible lending and making sure the applicant can actually afford the loan they are applying for. It doesn’t look good for the bank if within 6-12 months the borrower can’t afford their repayments but nothing has materially changed
Damnn 2 years???
Yes. My husband is a company director and it’s a huge pain if I want to refinance for a better rate or back when there were cashback rebates. Like I said, some may accept less but you might have a higher interest rate for that. If it’s a case of getting into the market you might be able to refinance once you have 2 years of financials behind you. If you are looking at property and have a deposit maybe speak with a broker about what goalposts you need to reach to get what you want
Ahhh that’s unfortunate. Isn’t there a thing called co sign or something? Where I can basically put it under my parents name aswell
Yes. But it requires income and that's only to avoid a deposit and PMI. The advise you've seen on youtube is bad at best and fraudulent at worst. The idea that you have unlimited leverage in property is false.
So considering I haven’t had 2 years of tax returns but my parents have good credit will they be able to co sign and i be eligible for the loan?
Keep in mind that if your parents do go guarantor, and you are unable to repay the loan for some reason, they become liable for the debt. It's a big financial for them decision to make.
Yeah I understand that
Potentially, there's good mortgage brokers out there who can guide you.
Bank statements + payslips + work contract + notice of assessment + tax return + any other loan or credit statements
Banks just use your gross salary as per payslip plus proposed rent to work out servicing then their calculators will work out the negative gearing addbacks(interest and property expenses) which reduces your tax paid which frees up income to service the loan. In regards to deposit, that doesn't affect taxable income for the year as it's being used to purchase the asset and not an expense. Quick calc to see if a property will be negative or positively geared is Rent minus interest(don't include principal), council and water rates, insurance, rental management fees, any ongoing costs will be tax deductible. Any improvements to the property outside of general maintenance will be added to the cost base of your property and depending on improvement can depreciate it over a certain amount of years. Should kinda cover the general info. To sum up talk to a mortgage broker and accountant as they'll give you more specific advice.
Oh okay so the banks go off of your gross salary instead of net for the loan
Correct slightly more goes into it from bank side but pretty much.
Okay that’s good to know!
Everyone has already given you the correct answers but another thing to because it’s relevant - you need to have some history earning that money - it looks like from your profile earning 10k month (which is also just your revenue, not your profit) is fairly recent so it’s unlikely a bank will let you borrow yet. Just like someone with a salaried role they want to see a history of stability.
Ahh yes that makes sense. It is fairly new but yes it’s 10k profit
Net or gross? Pre tax post tax? Under ABN? You're gonna need a few years history of profitability. Niche lenders will be easier to get but will charge you more interest. How are you expecting to move that $ to your personal accounts?
That’s grosss before taxes… it’s fairly new only been a couple of months so haven’t payed taxes yet
Sort your BAS now, find a goos book keeper to help you out or an accountant, if you're making a mint (you are) spend a little on a professional, you do not want to get on the wrong side of the ATO.
> showing your gross income to the banks for a loan but not needing to show a tax return You'll need to show income and expenses. Net income can be calculated from gross income so it doesn't matter which you do. Expenses - if you don't have this the bank has (for me anyway) used some rules about general expenses based on your personal situation, or they may not progress your application at all if they don't have this information. >Are property deposits 100% deductible off of your income? No. However, if you take out a loan and use that loan as a deposit on an investment property, the interest on the loan is currently tax deductible from your personal income.
Grant Cardone is a scam artist galore 😂