By
Franchise owner Liam O’Donnell, helps a couple short on space but big on ambition to launch two enterprises from the comfort of their own home
THE SCENARIO
Around a year before this deal, I wrote a loan for a young couple who were paying just over 7% interest with a non-conforming lender. The wife had recently launched a new business venture, which meant her income was low at the time the loan was taken out, and this had reduced their options.
However, with her business now gaining traction and income increasing exponentially, the couple were looking to secure the space they needed to increase their quality of life, both professionally and personally. They were looking to refinance and move to a mainstream lender; however, they had been turned down by their own bank and another broker. I was passed the client’s details by my referral partner and started to assess their options.
A year after the business was launched, the couple’s household income was significantly higher than it had been when the first loan was approved. However, their deposit remained an issue as it was derived from funds retained throughout the year to cover the next year’s tax bill. We needed to use their current income to apply for the loan; however, once the tax returns were lodged there would be no deposit remaining.
Furthermore, after lengthy discussions, I knew that their aim to move to a mainstream lender wasn’t going to be financially feasible at that point in time.
We therefore outlined a plan for the next 12 to 24 months, which focused on how we were going to secure that all-important extra space. To do this we assessed the business plan for the immediate and mid-term future, and in doing so we realised that once the necessary boxes were ticked for a more mainstream lender we could look at refinancing to a cheaper product with an offset account.
THE SOLUTION
I managed to have the deal approved based on the couple’s current BAS and a letter from their accountant. After discussions with both the accountant and the client we agreed that sufficient funds would be generated by the business over the coming months to cover the next year’s tax bill, thus freeing up funds for the deposit.
Fast-forward 12 months and we are now looking to move away from the non-conforming lender to a more mainstream lender, on a far more competitive rate. Given their current interest rate and Rockinghamaccess to funds, we were able to devise a plan to reduce the loan from 85% to 80% LVR, and this alone saved just over $20,000 in interest per year without paying lenders mortgage insurance.
We also managed to secure a 100% offset account to assist with interest reduction throughout the year by saving the tax funds in the account.
While it was a long process, once the deal had been approved the clients were obviously over the moon. Their new house has become the perfect place for the wife’s enterprise to flourish, while providing much-needed room for the family to grow.
Adding to their success, the husband has also now started his own business from home, making even more use of the additional space.
THE TAKEAWAY
Just because a lender has declined an application doesn’t mean there is no solution in the marketplace. Always exhaust every option. It may not be the short-term solution the client was looking for, but if you can provide a medium- to long-term outlook there is almost always a way for everybody to come out the other side with a smile on their face.
I truly believe this enterprising husband and wife duo will be clients for life – they could not thank me enough for not giving up when others had thrown in the towel. They were always big believers in going with a bank, but after both of these experiences with me they now understand the valuable role that non-conforming and alternative lenders play in the finance game.
Personally, I could not be happier that I offered a solution to a client who had almost lost hope. It may have cost them a bit more in the short term, but having them look beyond the numbers and showing them the benefits to their professional and family life, in my opinion, really reinforced the value of a genuine mortgage professional. I got to know my clients, their passion and their motivations, which gave me the drive I needed to find them a solution.
Liam O'Donnel
Franchise owner and broker
Resolve Finance Rockingham
