Untaxed allowances such as stipends and the government benefit LAFHA, Living Away From Home Allowance, are benefits provided by an employer. While they are classified as a type of income, your client’s lender may not assess these benefits correctly when your client applies for a home loan.
Stipend basics
The following professions may receive stipends to pay for living expenses, such as housing or transportation:
- Nurses
- Medical professionals
- Carers
- Clergy members
- Charitable organisations or not-for-profit institutions
If your client receives stipends and is trying to apply for a home loan, it may be challenging to find a lender. Only some lenders accept stipends as sufficient income on home loans. If you do find a lender for your client who accepts stipend as acceptable income for mortgages, they may be able to borrow up to 90% of the property’s value if they are in an excellent financial position, have stable employment, and have a good credit history with little debt. Some lenders may require your client to provide a letter from their employer outlining how long they’ve been working for the company, whether employed full-time or part-time and a breakdown of the stipends and how the payments are used.
LAFHA Basics
If your client is living away from home because of a job, they may be eligible for this government benefit, especially if they live overseas or in a different state and are an Australian citizen. Each lender has a different way of assessing this benefit. How a lender evaluates this benefit will depend on if the benefit is permanent or temporary. If your client is receiving a permanent LAFHA and has a good income, they may be able to borrow 95% of a property’s value.
If your client receives stipends or other tax-free Allowance, consult with the experts at Mortgage Street. We specialise in home loans using non-traditional forms of income such as tax-free allowances.