 Effective 1 January 2020, the federal government has introduced a new scheme for first time home buyers. Under the First Home Loan Deposit Scheme the government will now underwrite (or guarantee) loans for low to middle income owners to get people into their first home faster. What this means is that first home buyers will now be able to enter the market with as little as purchase costs, and 5% deposit* and…. no lenders mortgage insurance! Lenders will still do their normal checks on your financial situation but this will make it easier to get a loan without having saved a 20% deposit. This one change could literally save you tens of thousands of dollars! We also have word that we are able to negotiate rates with some lenders, as if you have a full 20% deposit which means your interest rate will also be eligible for better discounts as a result of the scheme with some lenders!
(*lender's criteria apply) Eligibility You can check your eligibility by speaking to us, or visiting this link. Call us if you're unsure about anything though! Property price thresholds To ensure the Scheme is only available for the purchase of a modest home, or the purchase of land and construction of a modest home, the following property price thresholds (maximum property purchase price under the Scheme) will apply in capital cities, large regional centres and regional areas; Region and Price Cap (AUD) NSW - capital city - $700,000 NSW - regional centre (Newcastle and Lake Macquarie) - $700,000 NSW - regional centre (Illawarra) - $700,000 NSW - other - $450,000 ACT - $500,000 QLD - capital city - $475,000 QLD - regional centre (Gold Coast) - $475,000 QLD - regional centre (Sunshine Coast) - $475,000 QLD - other - $400,000 For the full property price threshold listing for Australia click here. How to apply At present Wilson Financial is accredited with six lenders on their panel that are rolling are approved under the government panel to participate with the scheme. If you’d like more information or, if you’d like to apply, feel free to reach out to our mortgage broker contacts; Wilson Financial office - 1300 780 826 or 02 4860 3399 Liz – [email protected] or 0414 798 760 Chris - [email protected] or 0467 999 230 Colin - [email protected] or 0428 423 051
0 Comments
 Australia is currently experiencing the worst bushfire season on record. If you are experiencing financial hardship as a result of this crisis, financial relief may be available. Several of Australia’s lenders have jumped on board to offer assistance to their affected customers and, more broadly, to the Australian community as a whole. Below you will find a summary of what support financial institutions may be offering. You will also then find contact information for several major lenders. If you are unable to locate contact information specific to your lender please reach out to us as we may be able to point you in the right direction. Each financial institution is offering slightly different support to customers. This support may include;
Lender Contacts ANZ Customers impacted can contact a dedicated hotline on 1800 149 549. Claims can be made online at https://www.anz.com.au/personal/insurance/make-a-claim/ Insurance customers can call 13 16 14. Visit: anz.com/hardship CBA For information or to make a claim call 1300 720 814 or visit any branch. If you're a business customer call 13 26 07 or your dedicated CommBank relationship manager. Visit: https://www.commbank.com.au/support/emergency-assistance-package.html NAB NAB customers who have lost their homes can immediately access a $2,000 grant to assist with urgent needs. These funds will be deposited direclty into the customer accoutns as early as the next business day. NAB employees who have had to evacuate their homes can also access a 1,000 grant. Call NAB’s dedicated team on 1300 023 429. Customers impacted by the loss of a home who need assistance can also visit their nearest open NAB branch, contact their banker directly or call NAB Assist on 1300 683 106 (8am-8pm Mon-Fri, or 9am-1pm on Saturdays AEST/AEDT). Visit: https://www.nab.com.au/about-us/social-impact/customers/natural-disaster-and-crisis-support Westpac Call the Westpac Assist Team on 1800 067 497. You can also contact your local branch or Relationship Manager. Business customers should call 1800 029 749. For insurance claims contact 1300 369 989. Visit: http://www.westpac.com.au/disasterhelp St George If you’re experiencing financial hardship contact 1800 629 795. For insurance claims contact 1300 655 489. Visit: https://www.stgeorge.com.au/disasterrelief Macquarie Bank Customers should call 1800 806 310 for assistance. Visit: https://www.macquarie.com/au/personal/fire-emergency https://www.macquarie.com/au/about/disclosures/financial-hardship ING If you’re experiencing financial hardship contact 13 34 64 To make a claim call 1800 611 422 (24/7) Visit: https://www.ing.com.au/faq-result.html?faqid=7449 MyState MyState Customer Care Team is available on 138 001. CGU insurance policy holders wanting to make a claim should contact CGU Claims on 13 24 81. Visit: https://www.mystate.com.au/about-us/support#/about-us/contact-us/financial-hardship Resimac Call 1300 793 741 or email [email protected]. Visit: https://www.resimac.com.au/bushfire-support Pepper Money Call the hardship team on 1800 356 383, between 8:30am and 5:30pm, Monday to Friday (AEDT). Email [email protected] Visit: https://www.pepper.com.au/lending/help-centre/customer-service/financial-hardship-assistance Liberty Financial Call 13 11 33 Email [email protected] Direct message on Facebook https://www.facebook.com/liberty.social/ Visit: https://www.liberty.com.au/financial-hardship La Trobe Financial Call the Mortgage Help Team on 1800 620 639 For insurance claims call CGU Claims 24/7 on 13 24 80 Visit: https://www.latrobefinancial.com.au/ Rate Setter Call 1300 768 710 Monday to Friday 9.00am to 5.30pm AEST https://www.ratesetter.com.au/ Other assistance available to residents of the Wingecarribee Shire Council Mayoral Relief Fund Wingecarribee Shire Council have launched a Mayoral Relief Fund for residents directly affected by the Green Wattle Creek or Morton fires. Residents can apply for $500 for a household or $250 for individuals. Identification may be required. To make a claim residents need to fill out the PDF form available here: https://www.wsc.nsw.gov.au/mrf Free Mental Health Support She Counselling She Counselling is offering 5 free 60 minute counselling sessions for those directly affected by the Green Wattle Creek or Morton fires. She Counselling works with women over the age of 18. Services are provided in Mittagong. Visit: https://shecounselling.com.au/ Call: 0412 707 242 Email: [email protected] Nest Psychotherapy & Counselling Nest Psychotherapy & Counselling is offering up to 4 free counselling sessions at their office in Picton. Online and phone crisis support is also available. Nest works with anyone over the age of 16 and extends a particular welcome to anyone from the LGBTQIA community. Visit: https://nestcounselling.com.au/about/ Call: 0484 223 042 Email: [email protected] Want to give back to your community? Here are 3 great ways to support those affected by the devastation… Celeste Barber - RFS Australian Comedian Celeste Barber started a Facebook fundraising campaign on January 3, 2020. Money raised is going to The Trustee for NSW Rural Fire Service & Brigades Donations Fund. At the time of publication, this fund had raised nearly $50 million! DONATE HERE: https://www.facebook.com/donate/1010958179269977/10157671223743418 My Sisters Keeper – RFS Masks Ophelia Haragli is a Sydney cancer survivor who now advocates for cancer patients. She runs the ‘My Sisters Keeper’ Facebook page. When learning about our volunteer firefighters’ desperate need for respiratory masks, she couldn’t help but do something. Ophelia started a fundraising campaign to raise money to buy masks to protect volunteers from the short and long term implications of breathing in smoke. In record time Ophelia researched and sourced the masks and got them out to RFS stations, right in the thick of the crisis. Her lifesaving work continues. More information: https://www.facebook.com/Mysisterskeeperophelia DONATE HERE: Ophelia Haragli BSB: 082231 Account number: 436029234 Description: MSK firefighters World Wildlife Fund - Australian Wildlife and Nature Recovery Fund The World Wildlife Fund (WWF) works in partnership with a variety of organisations, communities and individuals to save the Australian environment. Among other things, their work focuses on protecting those endangered species most in need. “It’s been estimated that around 1.25 billion animals have been killed across Australia to date. This includes thousands of koalas and other iconic species such as kangaroos, wallabies, kookaburras, cockatoos and honeyeaters burnt alive, and many thousands more injured and homeless.” (Source: WWF) WWF are collecting funds to help save wildlife but also to assist in restoring our lost forests once the fires have cleared. DONATE HERE: https://donate.wwf.org.au/donate/koala-crisis/koala-crisis?t=AP0120W03#gs.rno0gb The team at Wilson Financial are happy to assist in any way, please contact our office on (02) 4860 3399 if you wish to talk to someone or need assistance connecting to these services.  Firstly – let’s just make it clear – I LOVE SELF-EMPLOYED CLIENTS! I recently had a client, let’s call him ‘Joey’ – and the first thing Joey said to me when he called me to discuss his needs was “you should know that I am self- employed, I know banks don’t really like lending to people if they are self-employed”. Leah: “that’s Ok Joey, I do not find that to be the case and I use all the major banks and 36 others so let’s have a look at it for you”. Joey had recently been to his local bank to find out if he could borrow money to purchase a new family home, but he had been told this wasn’t an option for him because he didn’t earn enough over the last financial year to service the new debt. Joey was disgruntled by this advice, as you can imagine – so he came to me for a second opinion. I got to talking with Joey, I knew that if I wanted to understand his business financials, I would need to firstly understand his business and how it operates. “Leah I’m really worried you won’t like what you see, the profit is only very small” Joey pointed to a small figure that definitely wouldn’t get him a loan. “That’s Ok Joey” I said “that is just a reflection of your company’s taxable income, but what about the company wages to you, and addbacks like deprecation and leases that the bank can add to your wages? Also these directors fees, are paid to you, and make your profit look small, but you personally received these!”. Reading Joeys financials after taking the time to understand his business structure, meant I knew exactly what figures I could use for my serviceability assessment. I was able to get Joey pre-approval for a loan of $712,000 to upgrade his family home. Reading financial statements can be daunting if you don’t know what you’re looking for. Thankfully, I have spent the last two years intensively training in self-employed applicants, and now understand various structures and flows of income, and how to present this to a lender to obtain approval successfully. This is a specialty of Wilson Financial and where we really shine. Joey and his family have now purchased their beautiful new family home, and they even got to keep their existing home as an Investment property. If you are self-employed and looking for a second opinion or want to talk to an expert about borrowing money – talk to Leah today!   Equipment Rent Vs Chattel Mortgage
Last month we had an enquiry from Bob* a tradesman to finance some equipment for his business. Not your run of the mill car or truck, but some specialized equipment for completing the job to benchmark levels. This is not considered a straightforward asset so it requires specialist finance and rate shopping. Bob had already found the exact piece of equipment he wanted, and was keen to use it on the job asap. The supplier had in house finance available and had already pre-approved him for the buy! Bob’s business partner however wanted a second opinion. Everything was moving too fast and he wanted to ensure it was a good deal so wrote to us to check it out and sent us a copy of the contract. Upon review of the offer we noted that it was a ‘Rental Schedule’ which means that you return the goods at the end of the lease. Jess immediately rang Bob to discuss it “Bob, do you realise that after four years, you have to return this equipment? Has anybody spoken to you about this? I’m just trying to compare this quote to us but at the end of our finance, you will own the equipment, and I just want to be sure we are comparing apples to apples”. Bob pondered “Nobody told me this Jess, let me ring and find out”. Later that day Bob rang Jess back “Ok, they have told me I can have the equipment for $1, at the end of the rental schedule, so now you can compare, what can you do for me?”. Jess thought about this, something didn’t sound right, as nowhere in the contract did it say $1 “Bob, I’d like you to request that they put that in writing, just to be sure that you know the contract terms are only $1”. “Fair enough” said Bob, and went back to the suppliers. The following day Bob rang with news “Jess, they have put it in writing but they have now told me that the buy back will actually be $1,980 for the equipment after the 48 months! I’m really shocked that the original quote was so much lower!”. Now that he had asked for it in writing, the figure had changed!! “Bob that’s ok, now that we have the true figure we can compare costs” Jess explained. Jess was able to provide Bob with a competitive quote, and compare the 48 payments PLUS the $1980 to her quote for 48 payments with no balloon or costs later. Jess also structured the finance as a Chattel Mortgage “Bob, by having this as a Chattel Mortgage, and being a GST registered business, you can claim the GST on the purchased goods as a GST credit in this quarters BAS, that’s close to $2k in GST!”. Bob was thrilled with the idea, and proceeded with the purchase via a Chattel Mortgage that Jess arranged. The importance of speaking with finance brokers who are specialists in equipment can be the difference between thousands of dollars in your back pocket or falling into the trap of not understanding all the fine print in the contract. We will always seek to compare the terms of other contracts with ours, and help you find ways to save money. Bob now has his equipment on site and is enjoying working much faster, and is assured that he will not have to hand it back at the end of term! *names and quotes have been changed to hide identity of the real client. This is based on a true story that occurred in January 2018  Of public interest these days is the choice to fix or choose variable on your home loan. You may have heard of bankers and brokers spouting the concept of 'the house always wins', meaning I guess that, the banks have better modelling, enabling them to know how to price fixed rates so that they always come out on top! Rumours aside, the best thing is to inform yourselves as to what the benefits are and what the drawbacks are. As mortgage brokers we don't advise on locking in rates or remaining on variable, but buyers should definitely consider the pros and cons. As mortgage brokers we CAN however provide you with options and a lot to think about.... The Pros: Great for those on a budget seeking security, who cannot afford a hike in rates. Stability in your budget, assuredness that your rate won’t increase (or decrease) The Cons:
The reserve bank has repeatedly announced more stability in the cash rate. The Sydney Futures Exchange long term yield curve currently pegs the market expectation to be one to two rate rises next year of 25bps. What should we do!??! A popular option we often find our first home buyers love is what we call a cocktail loan! Why not mix it all together a little if you want the best of both worlds...?  A lot of our clients split the loan half into fixed and half variable. This helps the client hedge their bets and allows them to still use a 100% offset account linked to the variable portion of the loan, and they can make unlimited extra repayments to that part without penalty. The client gets the best of both worlds and can mix the loan up into any portion they want. Also, you can look at asking your broker if the banks are negotiating on any fixed rates. Some lenders are currently in a little price war on the 2 year fixed rate, so the carded rate in the branch may not be the best you can get, always ask your broker! Lastly, I would stress that if you do wish to fix, consider paying the $395 annual fee for the 'package' that nearly every lender has. What this does, is with most lenders, gets you a further 0.15% off the fixed rate. This doesn't sound like much, but if your loan is just $263,000 the discount will cover the package fee each year, any loan size higher than that is pure savings. As an added bonus, you will get all the benefits of the package which are quite often, lowered app fees on various bank products, free renegotiations on your home loan (saving you on switch fees), valuations, offset accounts and transaction accounts without fees, annual fees waived on credit cards, and other soft benefits ! A broker can weigh all of this up for your accurately to help make an informed decision.
 Step 1 - Have your loan pre-approval in place
Knowing how much you have for a deposit and how much you can borrow gives you the confidence to make a calculated offer on your property of choice. Step 2 - Choose the right home in the right location Research your chosen suburb by checking all advertised listings in newspapers, the internet and real estate agents. Make sure that you know the price of recently sold comparable properties. By visiting open houses and attending auctions you will be more informed of the realistic value of a property. Does the property fit your family’s growing needs? Step 3 - Conveyancer/legal representative The real estate agent will provide a copy of the contract for sale which should then be given to your conveyancer for advice and checking. The conveyancer will advise you of your cooling off rights (which varies from state to state). Once the contract has been signed by both parties, the contracts are legally binding. The contract will indicate when the deposit will have to be paid. If no pest and building inspections have been carried out, it is advisable that they are ordered by the conveyancer or you can arrange this yourself. Step 4 - Make an offer For properties sold by private treaty you will need to make an offer to the listing real estate agent. Obtain a copy of the contract for sale and organise for your conveyancer/legal representative to check it. Properties being auctioned are frequently open to offers prior to the auction date. However, if sold at auction you will usually be required to pay a deposit of 10% immediately. The contract for an auctioned property is unconditional and no cooling off period applies. If bidding at an auction, make sure that your conveyancer/legal representative has checked the contract and organised pest and building inspections before you bid. Step 5 - Final loan approval We will organise your loan documents for the balance of the purchase price to be prepared and signed by you. Step 6 - Insurance • Lenders Mortgage Insurance • Your lender will require you to organise building insurance. • Mortgage Protection Insurance • House and contents Insurance • Income Protection Insurance • Life Insurance • Total and Permanent Disability Insurance Step 7 - Final Inspection Arrange for a final inspection (just prior to settlement date) with the real estate agent. Check for all inclusions in the contract for sale and that they are in working order. Check taps/light switches, power points, air conditioners, exhaust fans, hot water, swimming pool equipment and security system and request copies of all manuals for stove, dishwasher etc. Step 8 - Settlement Your conveyancer will attend the settlement. This is the day the balance of the purchase price is paid to the vendor. Stamp duty and lender’s mortgage insurance (if applicable) will also have to be paid. You can collect the keys from the real estate agent once settlement has been advised. What if something goes wrong or you change your mind? If you have signed a contract to buy a house it may be a costly exercise to withdraw even if you have not reached settlement. If the cooling off period has passed, the contract is binding. If you wish to get out of the contract you may be liable to pay compensation to the vendor. The amount will depend on the loss suffered by the vendor and is usually based on the amount it would take to re-sell the house including any loss on the subsequent sale. Read your contract carefully to be aware of the consequences of defaulting on the contract. If you do not wish to proceed with a contract, seek independent legal advice as soon as possible.  Here is a little insight into a few of the more interesting things that occurred in the last 24 hours.
“Hi Liz, I need a favour” said a friend, Harrison “someone has accessed my identity and fraudulently taken out a credit card in my name, and I need you to do a credit check on me to see if there are other banks involved that I have now got credit cards with”. “Oh no” I said, “not a problem!”. We then completed the necessary forms, and as Veda accredited agents accessed his credit file. Thankfully Harrison had caught them early by opening his mail box and finding the card, so no other banks were implicated yet. Being in the finance world himself Harrison mentioned “I’m going to set up a Veda Alert from here in, I just want reassurance that I know about this as soon as possible”. I agreed. Veda Guard tells you if there are certain changes made to your credit file without your knowledge, such as someone applying for credit in your name. It’s worth checking out, follow this link https://www.veda.com.au/yourcreditandidentity/product-comparison/veda-plan Veda states that more than one in five Australians have experienced some form of identity crime ! They have another service called Identity Watch https://www.veda.com.au/yourcreditandidentity/protect I would suggest to you though, that, Veda has SO many plans and services on it’s website that can easily be confused. Bottom line, if you need any help, call me! Quite some hours later another call came in from Gary “Hi Liz, I hope you’re well, but I have some bad news. I just got diagnosed with a condition and I need to know if I took out some personal insurance with you when I took out my mortgage”. I had to tell Gary he didn’t. Years ago when Gary rang us, we didn’t have those services, or offer them yet. It always seems like hindsight is 20/20 and it’s never easy telling someone that they declined insurance or didn’t have any in place. Gary now needed to take a half a year off work. Suffice to say I had some ideas for him “Gary please call the hardship line with your lender, and start now with requesting and negotiating a moratorium on your repayments. You really need a strong strategy to cover your mortgage between now and when you return to work in June”. I found the number and encouraged Gary to call as soon as possible. By providing medical reports Gary would easily qualify for hardship provisions. Essentially if you are finding it hard to meet your loan repayments for example, because of illness, unemployment, or changed financial circumstances, you can apply to your lender for a ‘hardship variation’ which will change the terms of your loan. To find out more about how to apply for this, head to the governments Money Smart website on this link https://www.moneysmart.gov.au/managing-your-money/managing-debts/trouble-with-debt#hardship Further if you are not happy with your lenders response you can talk to the Financial Ombudsman Service or he Credit and Investments Ombudsman, depending on the jurisdiction. As Gary had problems with memory I reminded him of his life insurance policy, and super balances “Perhaps contact your super provider to see if you can access the funds sooner under hardship provisions”. It was also possible he had some trauma insurance within his life insurance policy. Gary was able to take down some details that assisted with that process. Gary actually commented “Well even if you had offered insurance I probably would have told you that I couldn’t afford it as I was on a budget at the time”. Insurance is the kind of thing most of us can’t afford not to have however, and he realised this now. So much can happen in a day. Remember, we are aim to be as resourceful as possible at Wilson Financial. Whilst we may not always have the solution you seek when you ring, rest assured as our clients we will do all we can to help you with your financial circumstances.  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:
"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.  I really enjoy being surprised by new scenarios, and as many of my good referrers know I actually like a challenge.
So, when a local law firm sent me a family to help obtain some finance for, and they said “We don’t really have any income”, I became curious. Logically, people don’t survive without income, we all have expenses, so I knew the clients must have income streams. They had been knocked back by a few banks because ‘they had no income’, so they'd been told. In honesty they just hadn’t dealt with someone willing to listen to their story. A good mortgage broker will interpret the clients story, and the careful nuances of policy required, to find a path to approval. We just had to extract the information, and by that I mean, we must listen. Meeting new clients for the team at Wilson Financial is an art form for us. We are not about the transaction, or here to talk about ourselves, we are here to get to know our clients inside out. That saying, ‘knowledge is power’ is so fitting for our industry. You can uncover real insight if you just listen and learn from your clients. “So tell me about what you all do?” was my first question. Firstly, one of the applicants within the family group explained that she received an aged pension. Bingo! Acceptable to some lenders, and completely tax free! Of course some lenders reject this income source, however others, even mainstream ones, find it to be a perfectly reliable income. “I also work two days a week but it’s not really much” said the same lady who received the aged pension. Despite the minimal hours, she had held the job long term, so this was quite a stable and secure income in the banks eyes. You may be wondering, how does an aged pensioner obtain a loan? Well in this case the other applicants were younger, so we could build a joint case to lend, as long as we had an ‘exit strategy’ for how the loan was going to be paid off long term. So we already had two incomes that both the applicant, and other lenders had already thought were not important enough to consider. Very good ones in my eyes. Next, one of the younger applicants explained that they owned two overseas properties receiving income. Whilst they were problematic in nature at present, there were specific documents they could retrieve for us to be able to include a large portion of these incomes. So we now had four income sources. The younger applicants had children, so received some Centrelink part A&B payments. We could include 100% of this income as the children were under the age threshold the banks required them to be to use this, and further it is untaxed income so ever dollar counted. We now had five income sources. Suffice to say the loan ended up being a breeze to approve, we simply had to provide the correct documents to satisfy the bank. We also presented an overall strategy for how the three applicants would cover the debt long term. So next time your client is struggling with a lender, send them somewhere for some outside of the box thinking!  A good client of mine referred a colleague to me, lets call her "Angie". This is always the best compliment you can give a broker by the way!
Angie had rung her existing home loan lender for a top up to renovate her kitchen. They had said they would consider it but the top up would need to be a separate home loan, she didn't want this, but they said there is no choice, you have to have a separate loan facility. Already disgruntled with the rate, Angie rang another more competitive local building society. The building society said they could consider her, they ordered a bank valuation, but it came in too low. This was odd because their home was on a plot of land four times the size of everybody else’s property on the street. They had been told, “There are not enough sales of the same size blocks to justify a higher price on your valuation”. Angie had obviously been talking to her colleague at work about all the problems and frustrations. Her colleague Jack, had also visited two lenders before he had rung Wilson Financial so knew it was worth a shot. He knew we could turn bad news around to good. So Angie rang us for a chat and spoke to Liz who happened to answer the phone that day. When she rang, she explained her disappointment that she could not do a top up loan to her existing, and required a 'separate facility'. She did not see the point of having two separate home loans. Liz explained that she could have one simple home loan with any of our lenders, and it wouldn’t be an issue. We have no idea why a lender would require this but it was enough to turn her off dealing with them. Secondly, she explained the valuation. Liz asked a few questions and ordered a valuation online with one of our preferred lenders. We say preferred because their prices are low, their valuations can be completed online, and their policies have a wide scope. The products are good to boot. The valuation came in immediately, and was high enough to borrow what Angie needed so Liz let her know we could proceed to application. Of course, Angie wanted to know about the rates we could offer. Whilst we had been talking Liz had emailed Abby to start negotiated pricing online and an automated response offering one of the lowest rates we can get on the market had been received minutes later. Liz let her know. She almost did not believe us. We then reviewed her income and outgoings, dependents and overall affordability situation. Liz was able to confirm we could lend her the money if we simply reduced one of the credit cards down a little. Angie was happy to do this. She asked what next so we sent her an application and checklist. After thanking me for the help, we hung up. We had spent less than 20 minutes on the phone and covered all of the territory required to qualify Angie for a home loan. No bank valuer would be required to go out and file a report which can take a week,. We also had all the fees and rates ready to send her to sign, and we knew that if the payslips matched the data she gave us we would be ok. Suffice to say, the loan went through smoothly and Angie is now with her new lender and the renovations are now complete. We do not just shop around for clients on price, we shop on solutions. Lending can actually be easy.  If you’re not sure what is going on with your clients finance, and aren’t getting straight answers, do you start to wonder if your client is making up stories? Surely if the banker or broker had good news they’d have given us notification of approval?
So frequently my real estate friends say “Liz I think they’re just having me on and they can’t get approved. Can you ring them to find out if they need help?” My experience, is that when no answers are flowing… around half of the time (if not more!), nothing is going on. Here is a typical example of what is happening behind the scenes, from a new client who came to us last month. The applicants were referred by a good friend of mine in the ACT, after using their Facebook page to ask for a better broker. They had been waiting weeks to hear from their existing broker. When they finally heard he said “I haven’t done any work for you yet, I’ll have a look at it when I get back from holidays in two weeks”. Perhaps some people just don’t know how to say no I can’t help? Clearly the broker was in too deep and unable to find a solution. The clients had not lodged an application, but had expressed an interest in a house with an agent and were keenly hanging on to the belief this broker could help them obtain a loan. Once they heard he was going on holiday they realised they weren’t important to the broker, and thought to find someone else. Upon being assessed by our newest broker Abby, we found some debts that were holding them back, as well as an insufficient deposit. The same day that they contacted us, Abby let them know they had some obstacles. However … the difference was that Abby is trained and skilled to find a solution and offer it up. She discussed consolidating the debts and sourcing a security guarantor. The clients parents spoke to Abby to find out more information, and agreed to become guarantors. Abby had found a bank who would allow the parents equity to be used not only as deposit, but also to pay out those debts! The difference resulted in a confirmed pre-approval with a reputable lender. Where previously the agent was left wondering “what is wrong with this client, what aren’t they telling me?”, they now had a confirmed buyer! In so many instances, the client is not withholding information, they simply have none, as they aren’t getting efficient and transparent service from a brokerage that cares about them!  Last month we had a client come to us declined from a major bank. Something we see every week to be honest.
This case was a bit peculiar though, as our client was self employed and despite the business being run very well and making good income, the financials showed a small loss after wages, expenses and depreciation.This had caused the loan to be declined. Our client was now stuck between a rock and a hard place, as he had already bought the land, and needed to build the family a home to live in. Without a loan, they were stuck! Upon our assessment we noticed the business was growing rapidly, and the client could easily afford the debts he had, the trouble was the bank couldn’t pass the file for approval as a loss by the company didn’t meet policy guidelines. The tricky part was the bank he was declined at, in my opinion, was the one we were most likely to obtain approval through. We spoke to the clients accountant and requested a review of the 2015 financials, it was possible that they could be re-worked to run at a profit. The accountant reviewed his business, and took into account materials and supplies which were for jobs not yet invoiced, this is called ‘work in progress’. The correct accounting treatment is to match costs to the same period income is generated. This is called the ‘Matching’ principle - in this case it worked to our advantage as it meant we could run 2015 as a profit. The accountant got us a new set of financials and returns straight away. We also supported the application with a set of interim financials to show the business continued to run at a profit for the first 7 months of the current financial year, which always brings comfort to credit teams. Particularly where you are re-starting a financial year, they would want comfort that we are not robbing Peter (2016 financial year profits) to pay Paul (2015 financial year profits) ! From here, we re-submitted the loan for approval with the same bank and received it within 24hours. So you see, we don’t always need a new lender, sometimes we just need a new perspective.  Recently Mark contacted us for help with his own black hole of debt. As a single fifty something year old with a home, he had made a series of mistakes and fallen heavily into debt with credit cards. On top of his mortgage, Mark had over $40k in credit cards with double digit interest. This is something we do see as mortgage brokers, and it's important to note, that we have a no judgement policy at Wilson Financial. Why? Because that's not our job! Our job is to be solutions oriented, and create a new page where our client can start to move forward again. Based on Marks income and debts, his outgoings were much higher than his income. Trying to appease all of the credit providers and going onto payment plans had only gotten him so far. He dearly wanted to roll all his debts into one by using his homes equity, and never have a credit card again. By obtaining all of Marks statements for each of his debts including his home loan, we were able to credit score his repayment conduct. What normally happens in these situations is that people fall so far behind in repayments that they have overdue accounts and late payment fees. Various lenders credit score you based on how many times you were late and how many payments in arrears you are. From here, we shopped around with our 'non conforming' lenders, who are there to help clients like Mark with consolidation. Of course a few missed payments may not affect your credit report, but it will prevent you from refinancing to a major bank. By using Marks information we were able to identify the cheapest loan option on our panel for his specific situation. Once we found them we obtained a valuation on his property to figure out his equity position. We then helped him to complete a loan application and got him approved. Mark was thrilled with the result, as the new repayments were much less than his existing outgoings. Mark was now saving over $2,500 a month in outgoing commitments which was a big weight off his chest.
 What is worse than a decline? Being tied up in red tape is what is worse ! I had some new clients come in last month and I would call the loan structuring they were set up with by their bank a Big Mess! Capitals! Why? All three properties and all three loans were cross collateralized. They wanted to sell one property and move to the coast, but without a specialist to untangle this contractual mess, they were stuck. What is it? It is where the bank or lender will secure one loan with more than one property in order to improve it’s equity position. In effect, the bank sinks it’s claws into as much property as it can, on as many loans as it can. I use this term because in most cases it is unnecessary. Also, banks aren't inherently being 'bad guys' it is just sometimes the old school way of doing things, and completely unnecessary in this day and age in most situations. In the graph below, the loans represented as $ are mortgaged to the houses attached by lines. In this example, two mortgages are cross collateralized against three properties. To sell one property, the bank must revalue the related mortgaged property. From here the bank will determine how much they want the mortgage reduced by the sale.  Can it be avoided? Yes! With the help of your mortgage broker, you can choose to split your loans so that they are all ‘stand alone’. I.e. if you need equity out of your home to buy an investment, simply take out the deposit and costs as an equity loan, separately, that is only secured by your home. Then, take out an investment home loan against the investment property. You’ll end up with two loans but as both were used for investment both are tax deductible. When it comes time to sell your home or the investment, you will know exactly which loan needs to be paid off. If you cross collateralsed however, the bank can hold one property ransom to the other, demanding that you pay down debt other linked loans! I have seen this nearly bankrupt people in falling property value markets. In one particular case, I saw a bank try to force their hand claiming that the loans were cross collateralized. I investigated for the client and found they were stand alone, thus releasing the clients from a near fatal financial blow. This is the difference between someone who is an expert at structuring mortgages, and someone that isn't, or simply chooses not to care for your financial well being. The below graph illustrates a nice neat 'stand alone' mortgage structure, avoiding all the pitfalls of crossed securities. If any of these properties were to sell, the mortgagor would only need to pay off the linked loan/s. There is no confusion down the road, and no obstacles to refinancing individual home loans.  Further benefits are that if you require lenders mortgage insurance, because your equity is low, stand alone structuring will result in a considerably smaller premium. That saves thousands when we compare scenarios for our clients, to helps to better understand good loan structuring.
All the loans can be split by purpose for your accountant too, to make tax time easier. Further you can have greater control over where your surplus funds are going and which loans are being paid off faster. Preferably the rule is the non-tax-deductible ones! Suffice to say our new clients have now removed two investment properties from their own home, thus relieving a great deal of stress and ensuring that their 'castle' is safer.  Jane was a young mum with a toddler, a baby and a home business. Jane really needed a place of her own. She wanted to paint and put hooks in walls. She wanted to set up a home office where she could meet clients.
What she could not understand was why she couldn't get finance. The banks she had been to had told her that she couldn't qualify for a loan with them as her deposit was too small. On a small budget raising two kids, her husband working, there was not much left after rent and bills. She knew she could afford a mortgage, with rates so low, the mortgage would cost the same as rent! Fed up she asked a friend for advice and they recommended the services of our brokerage. Jane got in touch with Matt in our office who quickly explained that Jane’s deposit was indeed, simply too small. To buy the land and build the house she wanted, she would need wait and save, OR find a guarantor. A guarantor? This was the first time anybody had mentioned a second option to her, so she was keen to know more. “What exactly would they need to do?” she asked. Matt being a guarantor specialist, explained that a guarantor offers up a limited amount of the equity in his or her own home or investment. With this, Jane and her husband, Don could cover a full twenty percent deposit and costs. Then the remainder of the mortgage would be financed without a guarantor. This is the banks way of structuring guarantor finance, as it lowers the exposure for the guarantors to just small part of the mortgage. Jane had already saved enough money to cover costs, so her guarantors just needed offer around sixty thousand dollars as a guaranteed mortgage. There was no cash required from the guarantors; they simply needed to be comfortable allowing a mortgage on their property for this amount. Jane spoke to her parents that night. She knew they had always been interested in helping her step into the property market, and they said yes. They wanted more details so a call was a arranged with Matt as they were in another state. Matt called them and explained everything, including the banks requirements to consider seeking independent legal and financial advice. The parents were satisfied and wanted to proceed. They had one condition; that Jane and Don took out some income protection insurance and life insurance. We got George our Financial Planner to start work on that straight away. This was the insurance for our clients, as much as it was for the guarantors. It meant that should any illness or accidents occur that prevent them from making an income, everybody would be protected. Jane was ecstatic, she now had pre-approval to purchase land, and build the home they had dreamed of living in. Don was happy too, and seemingly grateful that Jane, Matt and the in laws were handling all the paperwork! A guarantor is not a complex arrangement, and many major banks and lenders will offer this service where the deposit is insufficient. You simply need to ask! In our experience, around one in five buyers have a parent who is willing to offer a guarantee. Having a guarantor also saves our clients lenders mortgage insurance premiums, and means we can negotiate a lower rate as the risk is much lower for the banks on these loans. Parents – you’ve got to love them! |
AuthorLiz Wilson has been working in finance for twenty two years now. She regularly blogs on industry topics and here you will find over a hundred personally written blog topics and case studies... 
Archives
December 2025
Categories
All
|
RSS Feed