Yahoo Finance JobKeeper shock: Why the payment could lose you a home loan
Last year’s JobKeeper payment announcement, and this year’s JobKeeper 2.0 unveiling, were a huge relief.
They helped millions of Australians across that metaphorical bridge – as Prime Minister Scott Morrison urged us to view it – to the other side of the coronavirus crisis.
Okay, they haven’t yet. But hopefully they – eventually – will.
We know that it’s all at significant national cost. In the new ‘kick that can down the road’ philosophy, Budget deficits aren’t nearly as on the nose as they used to be.
But at what personal cost?
At what cost is government assistance?
The good news is that the Australian Banking Association and its members issued a guarantee early last year that mortgage repayment holidays would not affect your credit rating. Indeed, your ‘repayments’ have been recorded in a different way for that purpose, or in large part.
But the shocking news is that some people in receipt of government income assistance, as well as the government stimulus boost, have that as an almost permanent blot on their record.
If you are an employee (on PAYG) who received JobKeeper but your hours are back to normal now, that’s fine.
The issue comes if you instead operate through a business, even if there’s only you in the business.
How can your finances be hurt?
Where this is a worry is getting a loan. Especially a mortgage.
It’s already been challenging for small business operators to get finance approved. The assistance that was extended makes it even more difficult.
Not just JobKeeper but the stimulus boost of a minimum $20,000, up to $100,000, is deducted from your income that’s considered when calculating your ability to service a loan.
This is because it’s not income earned by the business from trading activities.
That sounds fair until you realise that for many businesses, all of a sudden there were – and are – no trading activities.
Presumably the same treatment will apply to the new $750 COVID-19 disaster payment.
Ruling out all that income (and the small business stimulus boost) could well see your home loan application denied.
But it’s not just your income that could kybosh you.
What else counts in the calculation
Though the government wants to relax borrowing rules, this has been met with opposition in parliament. That means what I called the Netflix test on your spending still applies.
A potential lender will trawl back through your spending of the last three months – be super aware of this if you’re clicking from the couch on shopping websites in lockdown – to see exactly where your money has gone.
The idea is to catch your every indulgence and convenience and you may have a few extras at the moment!
The 12 categories on which you commonly need to report are:
-Groceries and other household expenses
-Clothing and personal car
-Owner-occupied utilities and rates
-Investment property utilities and rates (if applicable)
-Insurances
-Transport costs (fares, fuel, registration etc)
-Telephone, internet and other media (pay TV etc)
-Medical and health
-Education
-Childcare (where applicable)
-Recreation, sport and entertainment
-Child maintenance (where applicable)
-Other.
Also be aware that in that ‘other’ category they will consider any ‘buy now, pay later’ facilities. Your balance needs to be zero.
Better still, cut up and cut out these accounts.
All of the above will be tallied and netted off your (possibly reduced) income that you have left for a loan.
What you can do about it
The final element in your loan application is that Find out the shock things a lender will look at before approving your home loan.. Make sure your report is squeaky clean and your score as high as it can be - before you apply.
And if you get knocked back for a loan, don’t – whatever you do – simply apply to another lender.
Find out why first. There’s not much you can do about your income history – and amounts ruled out because they were government income assistance and stimulus payments – but at least you can rectify your spending.
Living your most frugal life in the three months before you apply could well pay you.
Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.
