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  • Student Allowance as Income

    Hi

    Does anybody know of a lender that will count student allowance as income in a loan application?

    Cheers

  • #2
    You would be doing well if you could get that through.
    As I understand it, in order to get a student allowance (but not necessarily student loan), you need no or very little income.
    so with no income, how are you going to demonstrate you can service the property loan.

    (bearing in mind the banks normally discount rental income to about 70%, so even if your property is cash positive, the bank won't see it that way.)

    let us know how you get on
    Food.Gems.ILS

    Comment


    • #3
      Hi Keith

      The allowance is about $340 per week after tax, my partner earns around $300 after tax and we get $146 from working for families. So that nearly $800 in the hand each week. I would of thought this could service a small home loan.

      Cheers

      Comment


      • #4
        As a first home or a rental ?

        as a rough guide
        the banks usually allow only around 33% of your Gross income to service a loan
        so assuming 19% tax on your income 640/.81= 790 gross pw
        plus 146 WFF (is that cash or a tax rebate ?)
        if cash 790 +146 = 936 pw
        936 x .33 = 308 pw
        but Student allowance isnt for whole year is it ?
        lets say 300 x 50 =15000 pa to service a loan

        at say 7% interest(even though you may get 6% its best to look longer term)
        15000/0.07 = 214k you could borrow
        assuming they expect 20% deposit (for first home)
        214k/80% = 267k house you could buy, with the bank expecting you to put in 53k deposit in cash or from equity in other property
        problem might be how the ongoing reliability of the allowance is viewed-what happens when you are no longer a student ?

        Get hold of a good broker & they could get something like that through.
        Last edited by Keithw; 04-03-2009, 12:40 PM.
        Food.Gems.ILS

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        • #5
          Student allowance to buy a property.....hmmm not sure that was what was it was intended for and not entirely sure I agree with it.

          Would love to hear how the loan application goes, so keep us informed.

          Jabs

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          • #6
            Originally posted by Jabroni01 View Post
            Student allowance to buy a property.....hmmm not sure that was what was it was intended for and not entirely sure I agree with it.
            I dont have such a problem with it, as the allowance would otherwise be used to pay a landlord rent, so isn't it better for society for the student to be buying the place ?
            Food.Gems.ILS

            Comment


            • #7
              off to see a broker tomorrow will keep you posted - cheers

              Comment


              • #8
                Originally posted by Keithw View Post
                I dont have such a problem with it, as the allowance would otherwise be used to pay a landlord rent, so isn't it better for society for the student to be buying the place ?
                totally agree students need to live somewhere too. better your own house than a scummy flat

                Comment


                • #9
                  I shudder at the thought of a household earning $16K pa in wages borrowing money, relying on government benefits to meet home loan repayments.

                  Comment


                  • #10
                    As opposed to those on a benefit having all their rent paid for by WINZ ?
                    (My ratbag solo mum tenant was getting $520 pw on the DPB)
                    which do you think will be more responsible and motivated ?
                    Food.Gems.ILS

                    Comment


                    • #11
                      Paying rent and buying a property on a mortgage are two very different levels of financial responsibility.

                      Comment


                      • #12
                        Yes I agree, but I think we need to be carefull that we don't prejudge all those on some sort of benefit as irresponsible, while all those that have enough income from whatever other source to be responsible enough to buy a house.
                        What is it you as a banker look for from a borrower ?
                        just their ability to pay, or their attitude & motivation ?
                        Food.Gems.ILS

                        Comment


                        • #13
                          From my understanding about receiving the Student Allowance (and I'm speaking from second hand observation here), one must apply for SA every year and it's only valid until the end of the student year, say mid-November.

                          Should "student" decide to attend Summer semester over the Christmas/New Year period, they must re-apply for assistance.

                          And they must re-apply for the next year in February/March, for the current student year. There can be a delay of 2-4 weeks in processing, due to the huge demand for the SA.

                          If I was a lender, I wouldn't be looking too favourable on SA as a form of income.
                          Patience is a virtue.

                          Comment


                          • #14
                            Percentage of income spent on outgoings seems
                            to be a criterion used, too. If over 35-38% is
                            committed elsewhere, my guess it will be thanks
                            but no thanks
                            (for your application.)

                            That much said, I join the others in commending
                            you on your enterprise. May the very best of luck
                            go with you in addition to your skill and prudent
                            financial management efforts.
                            Want a great looking concrete swimming pool in Hawke's Bay? Designer Pools will do the job for you!

                            Comment


                            • #15
                              Have just been to see a broker and the news is not very promising (as most of you have already guessed). Our income is to low for what we want to borrow and haven't been able to find a bank that wants to lend on a student loan.

                              I guess its time for plan B

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