- In Bee Savvy - Getting the most out of your loan, First things first - Steps before applying for finance
Many people use salary sacrificing to to pay for goods or services they need, and reduce their tax bill. But did you know that salary sacrificing can have an impact on your home loan application?
What is salary sacrificing?
So exactly what is salary sacrificing? A salary sacrifice is when you and your employer agree for certain payments to come out of your pre tax salary. These payments can be for a number of things. People can use it for super, child care, health insurance, car payments and more.
The benefit of this, is it reduces your taxable income, and thus your tax bill. But is this always a good thing?
Salary sacrificing and getting a home loan
There is a downside to salary sacrifices. If you are applying for a home loan, lenders may count your salary sacrifices as an expense. This can significantly reduce how much they will let you borrow.
What affects whether or not a lender will see your salary sacrifices as expenses? It depends on whether or not they
are voluntary. For example, if you are using salary sacrificing to pay car payments, you can’t just stop paying this. A lender will consider this to be an expense.
But what if you have chosen to use your pre tax salary to make extra contributions to your super? Can you stop these payments at any time? Then they will be considered voluntary. They won’t be counted as an expense, and won’t affect your borrowing capacity.
Have your income accurately assessed by an expert
The rules lenders have about assessing salary sacrificing and your income, can be hard to understand. It’s important to have your income accurately assessed. This is the only way to really know how much you can borrow.
At Bee Finance Savvy, we go over our clients income, including salary sacrificing, with a fine tooth comb. Thus, we can work out how much our clients can borrow, before we apply for a home loan on their behalf.
If you would like your income, and any salary sacrifices accurately assessed, our savvy broker Desiree is here to help. Based in the Sutherland Shire, Sydney, Desiree has helped many clients achieve their home buying goals.
If you’d like to hear from just some of our satisfied customers, take a look at our reviews on