Explore the potential impact of using a work travel allowance for a mortgage. Learn about key considerations including income stability, tax implications, debt-to-income ratios, and verification requirements.
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“Does anyone have any idea if you can use a travel allowance from work towards a mortgage.
I get between $900-$1600 per month tax free for being away from home for work.
Can a bank use this to determine how much you can borrow?
Thanks”
(Original question on Reddit)
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While I can offer some general guidance, it’s essential to note that policies and criteria regarding using a work travel allowance for a mortgage can vary among different banks and financial institutions. However, some key points are typically considered:
Stability of Income:
Banks typically look for stable and consistent income when considering mortgage applications. If your travel allowance is regular, it could potentially be considered part of your income.
Tax-Free Income:
Some lenders may be more cautious when considering tax-free income, as it might not be as verifiable or consistent as taxed income.
Debt-to-Income Ratio:
Lenders assess your ability to repay a mortgage based on your debt-to-income ratio. They will take into account all sources of income and existing financial obligations.
Verification:
Lenders might require documentation or verification of this travel allowance to include it as part of your income. This could involve providing records from your employer or tax returns to substantiate the allowance.
Lending Policies:
Each bank or lending institution may have its own policies regarding what types of income they accept for mortgage qualification.
It’s a good idea to directly consult with mortgage advisors or loan officers at different banks to understand their specific criteria. They can provide tailored guidance on whether your travel allowance can be considered as income for mortgage qualification and how it might affect the amount you can borrow.
Hope this helps.
Regards, Clive Fernandes (Financial Adviser)
Director – National Capital
Disclosure: I am the director of National Capital, a KiwiSaver advice firm. The views expressed in this article are the views of the author. The information provided is of a general nature and is not intended to be personalised financial advice. You may seek appropriate financial advice from a Financial Adviser to suit your individual circumstances or contact National Capital.
