Investment Loan Success For Self Employed Tradesman
Self Employed Loans Success With Extra $70K Borrowing Power
Client at a glance
Executive Summary
Mortgage Corp helped a self employed, first time investor secure his first investment property through increasing his borrowing power by $70,000. By digging deeper into his tax returns, we were able to explain in his loan application that his taxable income understated his actual earnings due to one-off tax deductions he had claimed. As a result, the lender was able to assess his borrowing power based on income of nearly $100k rather than $60k, increasing his borrowing power considerably.
Overview
Client: Jordan, client of Mortgage Corp since 2013
Marital status: Single
Income: Varies from $60,000 to $80,000 per year
Occupation: Self employed tradesman
Suburb of property: Greensborough, VIC, 3088
Objective: Get a self employed loan for an investment property with solid rental returns
Results: Increased his borrowing power by $70k allowing him to achieve his dream of buying his 1st investment property
Background
Jordan was a single, self employed tradesman who was looking at applying for an investment property loan to purchase a house in Greensborough.
As he was self employed, his income was variable however his last few tax returns were showing that he was consistently earning taxable income of between $60-80,000 per year.
Jordan had his heart set on one particular investment property that was selling for $650,000 as it promised solid rental returns. However, based on his taxable income, it looked as if he would only be able to get a mortgage for a property worth $580,000, which wasn’t ideal from Jordan’s perspective.
The Challenges
- The taxable income in Jordan’s business tax returns was less than what he needed to secure his dream investment property
Objectives
- Find a way to increase his borrowing power to allow him to purchase the investment property he really wanted
The Solution
Whilst many lenders and inexperienced mortgage brokers would have relied on Jordan’s taxable income to work out his borrowing power, Mortgage Corp understood that taxable income may not accurately reflect how much Jordan was actually earning. We dug deeper to see if we could use information in his tax returns to help increase his borrowing power.
Our mortgage strategist Neil Carstairs noticed that as a result of new tax laws in the 2015 income year Jordan had been able to instantly depreciate the full cost of any capital business asset purchases up to $20,000. In that year he had purchased a car for his business for $19,000, some PCs and notebooks and other one-off equipment.
Because these were one-off deductions for amounts which were actually capital assets, we put together his loan application asking the lender to ignore these deductions and to increase his taxable income for loan application purposes. This increased his taxable income from $60,000 to nearly $100,000, increasing his borrowing power considerably. This enabled Jordan to get a self employed loan and finalise the property purchase he was after.
As a result, Jordan was able to purchase his dream house worth $650,000 with a higher rental return instead of being limited to a property worth $580,000.
Results
- Got his self employed loan approved thanks to his increased borrowing power
- Bought his first investment property with great growth potential and rental return
- Structured his loans for better tax savings and further investment opportunities
Note: for privacy reasons, names and locations used in this case study are not real client names or locations.
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What’s Next?
Keep reading Getting A Self Employed Loan Isn’t As Hard As You Think!
How To Increase Your Borrowing Power For Self Employed Loans
