A Quick Overview
| Details | Description |
|---|---|
| Customer Goal | Refinance an existing property to release equity; purchase a new owner-occupied property |
| Problem | Unable to get lenders to make distribution add back for 50% of his income that went to five of his children through the family trust |
| Loan Amount | Refinancing: $107,6000 New property: $2,640,000 |
| Security | Refinancing: $1,760,000
New property: $3,300,000 |
| LVR and Term | Refinancing: 70% Loan to Value Ratio (LVR), 30 years
New property: 80% Loan to Value Ratio (LVR), 30 years |
| Income | $574,000 p.a. |
| Solution | Convincing the lender to take a common-sense approach, and, getting 100% of his total income serviced based on his specialist doctor status |
The backstory
Dr Dan, a renowned Neurosurgeon and part-owner at one of Australia’s most reputable hospitals, was looking for two home loans.
Firstly, he wanted to refinance his existing home loan and rent out the property. Having repaid most of the current mortgage, he planned to release some equity with the new loan.
Secondly, he wanted to purchase an owner-occupied property worth over three million dollars. He would finance the purchase through the home loan and also use the amount received from the refinanced property’s equity release.
Both he and his wife were confident that they could get the two loans from any lenders, given the high income he made.
They wished to move into the new place with their two children as soon as possible.
Therefore, they made an up-front payment of 10%, signed an unconditional offer and started with the financing process.
Problem: Family Trust Fund
An important detail to Dr Dan was that, as he was one of the owners at the hospital he was practising, he was self-employed.
All of his income would get deposited directly into the family trust.
From there, 50% of his income would come to him. The remaining 50% would go to the five children from his first marriage.
So, how was this trust fund a problem?
Well, while considering a mortgage application, lenders first check the amount you can borrow based on your actual income.
As stated earlier, 50% of the total income Dr Dan earns is distributed among his five children.
Most lenders only considered the remaining 50% as his income and processed only that amount.
For any million-dollar property, only half of his total income was not enough. So, the lenders Dr Dan went to refused to make the distribution add back.
With time ticking on him, due to the unconditional offer that he had hastily signed, he started to panic.
Getting to settlement
After trying to find a lender on his own a few more times, he finally decided on taking professional help. That is when he approached us.
We connected him with one of our top brokers, Prakash Rai, who has several years of experience in the mortgage industry.
Assessing Dr Dan’s case, he took his application to one of the big four banks.
He convinced the lender to assess his client’s total income by considering the fact that he was a specialist doctor.
And that, his specialization is generating the revenue and the service he is providing is irreplaceable.
He also put forward the fact that all five of his children who got the distribution were earning their own income.And that, he could stop the distribution anytime he wanted, and that would not affect his children.
The lender hence agreed to add back 100% of the distribution made through the family trust.
Further, to convince the lenders of the repayment capacity Dr Dan had, he presented the following facts and documents:
- As his income was affected by COVID during the last quarter of 2020, billing statements from the 2nd quarter of 2021 were provided. This proved that patients had actually postponed their elected surgery during 2020, and were rescheduled for 2021, so now his relaxed income has gone up.
- A rental income of $49,400 per annum from the investment property
- Monthly living expense limited to $8,247.83
Once his financial position was clear, the lender gave quick approval for both of his loans.
A happy ending
Under home loan for doctors, Dr Dan received a special discount on his already low variable rate, for both his loans.
When he went to the branch office to sign the settlement, even the staff there were surprised by the low interest rate his broker was able to negotiate.
Overall, the deal he was able to bag with the lender met well with his needs.
Want to add back trust fund distribution?
Our expert mortgage brokers can help you with making a trust fund distribution add back for your mortgage.
If you are facing trouble getting 100% of your income serviced under any circumstances, we are here to help!
Call us on 1300 889 743 or complete this form to receive a free assessment.