Untaxed allowances such as stipends and LAFHA, Living Away From Home Allowance, are benefits provided by an employer. While technically a type of income, these benefits may not be assessed correctly by lenders when you apply for a home loan. Here are a few things to be aware of:
Stipends
People who may receive stipends to pay for living expenses such as housing or transportation are nurses, medical professionals, carers, clergy members or other organisations classified as charities or not-for-profit public benevolent institutions. Only some lenders will accept stipends as income for home loans.
Suppose you do find a lender who accepts stipend mortgages. In that case, you may be able to borrow 95% of the value of your property if you are in a stable financial situation with secure employment and you have a good credit history with little debt. Some lenders may require an employment letter outlining the length of your job and if it is full-time or part-time and a breakdown of the stipends and how you use the payments.
LAFHA
This government benefit is available to employees required to live away from home because of their job. These employees may be Australians living overseas or moving to a different state for their job. Lenders have their own way of assessing LAFHA, including whether the benefit is permanent or temporary. If you are receiving a permanent LAFHA and have a good income, you may be eligible to borrow up to 95% of the property’s value.
Lenders do not always appropriately assess tax-free allowances such as LAFHA and stipends. If you have income consisting of untaxed allowances, you need to work with a broker when you apply for a home loan. Mortgage Street is a non-bank lender whose team of brokers specialises in getting loan applications with uncommon income and employment to be approved.