As a Loanapp user, you are able to nominate when property expenses such as mortgage repayments tied to an investment property are eligible for negative gearing benefits. This flag is then used to trigger the use of lender negative gearing logic in the serviceability outcome.
How do I flag negative gearing for a property/mortgage?
For Existing (already owned) properties
In Loanapp, when you are entering the applicant's property details in their current financial position, there are three different sections of data that can be added for the property:
the property details,
any income (rental) for that property,
and any mortgage against that property.
To flag that the mortgage repayments are to be considered 'negatively geared' when you are entering the details for the mortgage, you need to select NO to the field 'Clearing balance on settlement?". This will denote that the mortgage is to continue as part of the applicant's financial position.
Where 'Clearing balance on settlement?" = NO, the "Negatively Geared" tick box will appear. By ticking this box, you are setting the mortgage repayments on this mortgage/property to be treated with the lenders' negative gearing logic in the serviceability calculations.
For New Properties (being purchased as part of the application).
Where an applicant is purchasing a new property as part of the application, you will enter the new property details in Securities element of the Loan and Serviceability section of Loanapp. You will then complete the details for the new loan being applied for. Its in this section that you can flag that this new loan (and repayments) is to be treated with negative gearing:
Lender Serviceability Config: Negative Gearing
As a Lender, you are able to set the treatment of Negative Gearing benefits in serviceability calculations.
You are able to set separate Negative Gearing logic on Continuing Mortgage Liabilities (already held by the applicants and to continue) and New Mortgages (the loan that is being applied for).
Logic Settings
There are 5 settings for how you will calculate negative gearing benefit
Actual Rate
Term Loan: Owner Outstanding Balance * Annual Interest Rate
LOC: Owner Credit Limit * Annual Interest Rate
Partial Refinance: Owner New Limit * Annual Interest Rate
Actual Rate New Loan
Term Loan: Owner Outstanding Balance * Negatively Geared Actual Interest Rate
LOC: Owner Credit Limit * Negatively Geared Actual Interest Rate
Partial Refinance: Owner New Limit * Negatively Geared Actual Interest Rate
Benchmark Rate
Term Loan: Owner Outstanding Balance * Negatively Geared Benchmark Interest Rate
LOC: Owner Credit Limit * Negatively Geared Benchmark Interest Rate
Partial Refinance: Owner New Limit * Negatively Geared Benchmark Interest Rate
Lender Specific
Term Loan: Owner Outstanding Balance * Lender Specific Rate
LOC: Owner Credit Limit * Lender Specific Rate
Partial Refinance: Owner New Limit * Lender Specific Rate
Lender Specific or Actual Rate
Term Loan: Owner Outstanding Balance * Annual Interest Rate OR Lender Specific (if Annual Interest Rate does not have value)
LOC: Owner Credit Limit * Annual Interest Rate OR Lender Specific (if Annual Interest Rate does not have value)
Partial Refinance: Owner New Limit * Annual Interest Rate
Checking Negative Gearing Calculations in Serviceability Result
As a Lender, you are able to test negative gearing configuration by checking the Serviceability Test Results against an application. To check the results, find your application on the Application Grid, and select "serviceability result" from the options for that application:
In the Serviceability Result data, go to "Main Indicator Data Object" and expand this section:
You will be able to see the calculated negative gearing benefit for your application, to check your formula and calculations:
