Slowly but surely we have seen every single last lender on our panel of twenty five lenders, restrict their lending to the non-resident market. Many have simply stopped lending to non-residents completely.

Historically we had lenders such as St George, with a dedicated non-resident lending cell, or Citibank who are a global lender who deal in foreign loans readily. 

The trigger for this avalanche of restrictions is a series of audits amongst lenders that has uncovered fraudulent Chinese income documents. ANZ banking group and Westpac Banking Corp found hundreds of home loans backed by fraudulent Chinese income documents. Allegedly these were manufactured with the help of dodgy mortgage brokers.

If I were to take the industry whispers at face value, this has been happening routinely. In May of this year Mortgage House has stated that it has declined foreign business, because according to their Chief Executive, Ken Sayer, “We did not want the grief. I knew this was coming. It was a no brainer,”
​
Our last remaining lender to accept non residents is Citibank. However, they will only allow non-resident applications from it’s 'gold' rated list of currencies. Further, the applicant must be in the country of that currency. Chinese Yuan is not on the list therefore residents of China need not apply.

We are no longer able to find a single lender on or off panel that will look at Chinese non-resident investors.

​Lucy and John contacted our office as they wanted to upgrade from their current home. They were 58 and 62, still working and in good health. “Are we too old to increase our home loan?” They asked. “We need a bigger home closer to town as the kids are older now, but still living at home while going to university”. They had a mortgage, but it would need to be increased to pay for the upgrade.
 
Banks and lenders like to make sure that they aren’t getting you into a debt that you won’t be able to repay in retirement. When is retirement? Well, that’s a grey area isn’t it? (Excuse the pun!)  In our industry we talk about a clients ‘exit strategy’. An exit strategy is basically an explanation to the bank as to how you will afford a mortgage, or pay out your mortgage when you retire. Exit strategies are particularly important for clients approaching retirement age yet still requiring a thirty year home loan term for affordability reasons. If you want a 30 year loan term and you will be 92 at the end of it, we will need to sell the bank your ‘exit strategy’.
 
We spoke to Lucy and John about their plans for this. “How much longer do you plan to work for?”
 
“Well, we both feel we want to work for at least another ten years each, but we still want a 30 year loan term because we have an investment property we will sell to pay off all our home loans at that time” said John.  Furthermore, we realised that they would have substantially more invested in super after ten years working. We diarised all of this for our credit officer so that they would be able to see how the client could still justify a thirty year loan term.
 
Of course, it’s not that simple for everyone. Some clients don’t have assets or super to lean on and will need to seriously consider a shorter loan term in order to obtain approval.
 
Many clients do not have a financial plan laid out, and only a basic understanding of what assets they hope to have in place when they retire. In order to find out how much you can borrow now, and plan for your future, why not see one of our mortgage brokers and our financial planner to work out a plan for your future? 

​Sally, a single mother, had moved to a warmer climate to follow her dream of raising her family by the ocean. Once settled with work and school routines, Sally desired a home of their own to nest into. She wanted to move away from the insecurity of the rental market, so that the kids could paint the walls or accidentally put holes in them!
 
Sally owned a house back in her native Canberra, which she was now renting. Though Sally could pay her current mortgage costs, she did not have enough savings to buy a second house in her new hometown. She didn’t want to go through the home loan application process again, besides, she liked her home loan. Enquiries had suggested that re-approving would mean she had to pay lenders mortgage insurance fees again. Sally thought wistfully ‘if only I could move my house’.
 
She resigned herself to rental life and would have gone on in this way indefinitely, had it not been for bumping into her friend and broker Liz. As Sally explained her situation, Liz shook her head. "You do have options, Sally!" Sally looked surprised. "Really? What are they?"
 
"Two words" Liz said. "Portability feature".
 
Porting loans is a little known feature that most loans have written into the loan contract. Many banks will allow you to ‘port’ your mortgage from one property to another. Portability generally avoids a new financial assessment or new loan fees. The benefit of this is that you are able to keep the terms and rates of your original loan.
 
There are clauses to be aware of, however. A major condition is that both the sales of the old home and the purchase of the new home must happen at the same time, or prior to the purchase of the new home. Porting is NOT bridging finance. The loan's original loan to value ratio and amount must not increase. For Sally, this meant finding a home that was of roughly equal or lesser value than her Canberra house. Sally would have to cover the sale and purchase costs, or have this covered within the sale price. Porting is therefore, a brilliant solution for down sizers.
 
Sally was thrilled. She started looking for a local home for herself and her boys, and soon found one that suited their needs perfectly. Luckily the value of the home was less than her Canberra house, which meant her loan value was decreasing even after sale fees and stamp duty costs. Porting her loan would be no issue; she put her Canberra house on the market, and put in an offer on the new house. We submitted the paperwork to her lender to start the process.
 
Sally and her boys were finally able to leave the rental market and gain the security of the family home she longed for.
 
Important notes:
 
In some cases if the two properties aren’t going to settle at the same time, the client MUST sell their home first, and port the loan dollar for dollar against a term deposit before moving it to the new property.  If the reverse were true, porting would not be an option as the client would need bridging finance. If this sounds like a feature you'd like to explore, please call our brokers today for more information and advice!

Steve wanted to upgrade his work ute.  It was old, business was booming and he knew his old ute wasn’t doing him any favours getting new work. The old Triton couldn’t keep up with the demand of his growing and successful business and  he needed more towing capacity, as well as a larger tray to fit more machinery. The problem was, the quote from the car yard for a trade in wouldn’t even cover how much he owed.
 
“Liz, what do I do?! I thought I’d get heaps more on the car but the trade in quote means I’ll still have a few grand left owing on the truck with Capital!”

Trading in your car can be an exciting time, new wheels means more capacity to do more work. You can’t help but feel like your business is doing you proud when it can afford shiny new equipment and investing in your business is investing in your future.
 
The issue is that cars are losing their value faster than ever: “Steve, cars are devaluing faster than ever, so we have to be careful that when we finance this upgrade we take this into account!”

Cars are devaluing faster – particularly some makes here is a great link to explain some of these issues. http://wealthartisan.com/why-do-new-cars-depreciate-sharply/
 
I asked Steve “Did you put a large balloon payment to the end of your term?”

“Yeah I seem to recall I did.  I didn’t put any deposit down at the time either.  The other thing is, I’ve put tons of clicks on the car as there have been lots of jobs out of town. I’ve really worn the old thing out to be honest.”
 
“Ok” I said, “that’s fine, and perfectly normal, but now that you’re trading in and upgrading,  the wear and tear means you’re getting less than what you owe on it. This is called negative equity. “
 
I explained to Steve that we’d be able to roll the remaining debt owing into the new finance with no issues, but we were going to build in a smaller residual this time, and accelerate his repayments so that he wouldn’t fall into the same trap. We only allocated 15% to the balloon instead of the normal 30% as he really wears his cars down.  Given rates had dropped so much since his last car finance the repayment was only $40 per month more. “Gee that’s ok, and now I can rest assured this won’t happen again in 5 years as I’ll be ahead in my repayments!”
 
We like to know how your business operates so that we can understand and strategize your finances in advance. Simple tweaks like this won’t be noticed over the short term, but can deliver benefits at upgrade time by not punching you in the wallet!
 
Wilson Financial, we understand the fine print so you don’t have to.

​For Lockie, it was time. Time to buy his first home! His first port of call was the bank. "We need you to prove you have genuine savings," was their response. Lockie, being the kind of bloke that he was, nodded wisely, but left the meeting utterly confused. He found us soon after. "Ok, so I need advice. What the heck are genuine savings? What does that even mean? You gotta give it to me straight!"
 
Those two words that provide the magical gateway to many a home loan approval; Genuine Savings. What it means, is that the bank wants to know that you have the capacity to save. This means keeping money saved in an account for three months or more. Do this, and the bank will deem you to be a lower risk client. Genuine Savings are  important for:

• People without equity in another property
• Low deposit home loans where the borrower is putting in the minimal 5 - 10% deposit.

For Lockie, as a first home buyer, this was his situation exactly. 

"Well that’s fair enough really! I can do that!' Lockie replied. We laughed, sitting him back in the seat. 
 
"Genuine Savings can't be choppy. What that means, is that you can't put $2000 in, then a short time later, take $2000 out. $5000 in, and then $3000 out…that sort of thing. Sure, a lot may be going in, but a lot is also going out. Genuine Savings looks more like steady growth in the total amount, through repeated deposits only."

This is an example of choppy NON genuine savings. 

A lightbulb went off for Lockie "Oh ok, so I really should have a separate account for this shouldn't I?" he said.

"Yes, it can't look like slowly saving $500 per week over a few months, and then at the last minute, dump in $10,000 from selling an asset or a sudden windfall. The windfall portion won't be considered 'genuine'!"
 
"But…" he trailed off, a bit exasperated. "What about the savings I already have? It's taken me a fair while to save it up, but I did get wiped out when I bought a car a month ago.  Don't tell me I have to start all over again!?" He slumped, his dreams of soon owning a home threatened.
 
"It's ok, since you started saving after the car purchase, will count as one months genuine savings, so you just have two more to go" we reassured him.

Below is a perfect example of how genuine savings should look but please note, plateaus are also ok.

​Also, if you do get a lump sum, you can simply stick it in the bank for three months and if you haven't touched it, or even grown on it, the bank will deem it Genuine Savings, because you've proven your ability to hold on to it and save. Believe it or not, that’s really hard for many people!

Today I discussed with our financial planner George, an interesting story about how we can advocate for our clients insurance needs. 
 
We had a client, let’s change his name to 'Mark', looking to get insured through Wilson Financial. He was healthy, had a strong income and he was tripling his debt by buying a new home and renting their current home. He was building his wealth and knew that he needed cover to protect it. 
 
During our fact finding process we found that a decade earlier Mark had been diagnosed with a serious condition which would prevent him from being insured. Various lifestyle changes meant that he had since stopped experiencing symptoms however, "I haven’t had any issues whatsoever since I moved to a different climate, that was over a decade ago".
 
The issue for the insurer was that he had been to a doctor just a few months prior with a symptom that could possibly be related to his previous condition. The underwriter assessing his insurance connected the dots and decided they wouldn’t insure Mark. This put the client in a difficult position "I never imagined being in this much debt, I was counting on the insurance".
 
Rather than accept the decision and inform the client, George took things a step further. He personally contacted the underwriter who had made the decision on the case and discussed the facts surrounding it. As it turns out, the incident three months ago resulted in a series of medical tests and X-rays that could potentially prove that the doctor’s visit was unrelated. George then asked the client to go back to the hospital and request these records.  With this new information, they were able to confirm that the symptom was not related to a major condition, and they reversed their decision.
 
George tells us that "Sometimes, due to major medical issues it is impossible to get insurance for our clients, however; we do everything in our power not to accept a decline on an application. I wouldn’t want to deal with the stress and anxiety of not being covered, and we don’t want our clients to go through that either."
 
We think outside of the box to get results, we work with our contacts within the industry to better our clients position, and we will not give up on what we believe should be approved.

*Names and minor details have been changed to protect identity

A tradesman came to see us last month, disgruntled with his current bank, and keen to take the dive into becoming self-employed. Let’s call him Paul.

Paul was very adept in his trade, having worked in it for over a decade. He had diligently paid down his home loan and had a good piece of equity in there. Unfamiliar with business loans or how banks worked, he had gone to his lender to ask for advice. He’d been referred to a small business banker who hadn’t called him back. A friend had told him to speak to me about financing some equipment.

Paul had a great credit character. This was illustrated by his good job stability, repayment history, equity position, and clear credit file. I asked Paul what he wanted to do. “I need to buy about $70k worth of equipment before I can go on my own. I’ve found the goods, but I don’t know how to get the finance”. Paul thought he needed a small business loan, however, he was buying equipment. Equipment is great collateral because it can be repossessed! As negative as that may sound, this is how the banks think. If they have ‘security’ or ‘collateral’ you’re going to get a better rate, and a higher chance of approval. I would add to this that the process is a lot simpler and straightforward then a small business loan that is unsecured.  I discussed the equipment loan structure with Paul, and we worked through some cash flow forecasts based on his industry knowledge.

With a start-up, we must illustrate the affordability equipment through he business’s performance. In addition, the banks sometimes like to see what we call ‘hurt money’. This means the banks want to see you as the borrower put some of your own cash on the line. So for Paul, we quickly arranged a refinance (to a much better rate of course!) and a top up so that he’d have some hurt money to throw in.

Suffice to say the lender approved the equipment loan off the back of his good character, cash flow projections, collateral and hurt money – the perfect mix for success!
​
Paul is now about to set up shop for himself, a dream he has had for many years, and one that was well within reach once he realized how to go about arranging the finances. So, if you need equipment, talk to Liz about equipment finance!

Ever seen a house that needs a little TLC before you’d consider moving in? That’s how our client ‘Sally’ felt about a cottage she saw here in the Southern Highlands.

Sally was working way too many hours to even consider renovating herself. Yet the cottage was for sale as is and she knew it had potential.

“Liz, what would it take to buy this property?” she asked me. As a long term client I knew she was serious and was able to quickly assess that she could afford the property. “It’s definitely something you can afford Sally, the numbers stack up, let’s get you a pre-approval in place so you can make an offer with confidence” I suggested.

Sally was reluctant… the property needed new floors, had a very old-fashioned kitchen, and needed a good paint. “If I use my cash to buy this property, I won’t have much left over for renovations, so I’m not sure it’s a good idea” she said, thinking out loud.

She was right. To bring the property up to standard she had calculated around $40k to $50k of works before she would feel comfortable living there. However, all was not lost! “What about obtaining a build contract for the works to be completed? We can then finance a majority of it as a construction loan after settlement, and this way you won’t need to renovate yourself?” I suggested.

Sally liked this idea, given that she could afford the repayments on an additional construction loan, and it meant she would have a qualified builder looking after the renovations. As we all know too well, renovating ourselves can take ten times as long as paying a builder!

Sally went out and obtained a few quotes, found a builder she got on well with, and engaged him to provide a formal quote, plans and specifications. We then used this to obtain a bank valuation on a construction basis, so that the bank was able to take into account the additional value the construction works would add. This then enabled us to finance a majority of the build, which meant Sally could safely make an offer knowing she could work towards a completed product.

In the end, Sally completed her renovator’s delight and was very happy with the result.
We have many clients just like Sally that are investors, home owners, or renovators that seek finance to renovate.

​
Names, locations and minor details have been changed to protect our client’s identities. 
​

​​Angela came to Wilson Financial as she and her partner were looking to separate. They had agreed she would take over the house mortgage in addition to paying him out half of its equity. She realised she would need a loan.
 
Like most people, Angela went to her existing lender to ask for advice and guidance, assuming this was the next step. Like so many that we hear of, the information provided to her was not only misleading, it was out and out wrong! "You just need to take one name off the mortgage contract." 
 
Actually, if one person is to exit a loan contract, then a completely new contract must be created. 
 
This kind of gross error in the provision of essential information - by a supposed in-house expert - only made a stressful time for Angela more difficult. 
 
Luckily Angela was then referred by her solicitor to Wilson Financial. We picked up the phone to her hopeful voice; "Apparently you're the person to talk to in this town if you want to know what you can borrow". 
 
We assessed her finances and request holistically. In order to afford the payout she would first need to consolidate some debt, which we guided her through. Then, to figure out exactly how much she could borrow, we ordered a valuation for the house. This saved the separating couple over $600 in costs in ordering a licenced valuation, as it was paid for by the bank thanks to Wilson Financial's special arrangement with our many lenders. 
 
We provided an exact figure for how much Angela could borrow thanks to the consolidation of her debt, and a clear figure for the amount she would owe by taking on the new mortgage contract.
 
As a result we could accurately quote her new outgoing commitments. After debt consolidation and a reduction in all her debts rates, the repayment was not going to increase! "That’s so good, to know I can afford this already” Angela expressed with incredible relief upon being told.
 
We went on to guide her through consolidation of her new loan and payout of her ex-partner with sensitivity and minimal fuss, during what was clearly an emotionally trying time for both of them. 
 
Angela walked away incredibly grateful, as she was finally able to move on. She now had her own home she could fall back on, a rock of security after such a difficult time. 

Here is a Facebook entry I wrote a year ago that I thought would be good to revive in blog format!  Yes it’s me on my soap box, but I wouldn’t have it any other way…Let's put rates aside and look at two other, and more important aspects of what this business offers.

Firstly… Policy. I cannot tell you how many people come to me, thinking I'm about to shop rates, fees, features and so on for them. The first thing I need to do is find the correct lender for what you are trying to achieve, based on policy issues. Well over half our clients are going to be restricted on policy and who will approve them. Yes we have all the major banks, second tier lenders and so on, but it's a maze out there people!

This is where the horror stories come from (“The bank wouldn't approve me, but they approved my friend - banks are awful!”) you just can't stick a round peg into a square hole. What suits one does not suit another, and due to privacy I can't really explain that without using general policy terms why your friend got approved and you didn’t. Some policies can be stretched at certain banks if you have strengths elsewhere, yet some flat out can't. This is why our fact finder form is five pages long. You are not the sole product of your income. Policy can pertain to employment type, length, income sources, your age, postcode of the property, property type, property zoning, your assets Vs liabilities, Debt servicing ratios, separation agreements, government income types, product type sought and the list just goes on and on.

Until I go through all five pages of our fact finder, I generally feel I have about thirty percent of the picture. So, with policy in mind, what we do is specialize in; approvals, knowledge & credit assessment first and foremost. I vet the credit policy at every lender I know, so if you get through my credit assessment I will get your approval or advocate for it if I believe in it, and I will be heard! I cannot tell you the amount of times people walk into this office every single week declined from one lender, and we have a perfectly achievable solution elsewhere. I cannot explain the time taken out of every single day to make sure every client fits the lender policy. Research, reading, vetting, talking to credit contacts, checking each banks calculations with different variants of the same information, bank development managers is a huge part of our job as brokers for finance for homes and cars. Let’s not forget, policy changes come out weekly… what applied last month, may have changed at your lender this month. You need an expert, not just a good rate.

Secondly… Speed and accountability. Do you want your lender to take a couple of days, or are you willing to accept weeks? What if things go wrong, who is your advocate, who will escalate your issue to higher powers, special contacts, or resolve blockages or miscommunications for you? Does your broker have  a premium service agreement from their banks? We do! We hold banks accountable and this can take countless phone calls, emails and online escalations from many angles. Whilst you may be disappointed things take another few days, imagine if you didn't have an advocate, I can assure you, it can take weeks longer without someone holding the bank accountable for you.

For us, we like to action everything immediately and apply countless pressures at every step of the way to ensure response times are fast. We aim to reassure and update you regularly again, a huge part of our day is keeping the lines of communication open. Whether we are updating you, solicitors, accountants, real estate agents or banks, we find this keeps everybody calm and in control.

I'll post another day on why rates may not be the best for you, when fees, policy and features could save you more. It's a complicated world out there in lending, and over the years it gets more and more interesting. Thank you for taking time to learn more about what we do – we really do love advocating for you here at Wilson Financial.