By
Broker and Hype Financial MD, Luke Cieslak is accustomed to thinking outside of the box. But when an entrepreneur and his wife needed assistance with a renegotiation, he had no idea it would turn into a near-$2m deal
THE SCENARIO
Enterpreneurs and business owners are often underestimated and overlooked by banks, yet their financial contributions – not to mention the innovations they spearhead – are vital to a country’s economy.
My client, Michael, is an enterpreneur and leader in his field who operates a highly successful business in Melbourne. He runs two busy practices, hs developed a number of health-related apps, and counts many Melbourne's elite atheletes and sporting stars among his clients.
Self-employed for 30 years and a loyal and long-standing customer of a major bank, he contacted his lender to renegotiate a 4.55% pa home loan rate – the first step to securing finance for a new investment property he wanted to purchase with his wife, who works as a teacher.
A week after lodging the enquiry, Michael was still waiting for a response, and growing frustrated with the treatment he was receiving he enlisted the help of a broker. While the initial conversation focused on his renegotiation, it transpired that he also had a line-of-credit facility, a couple of business loans, and numerous business and savings accounts.
The couple were paying between 5% and 6% pa in interest, plus fees, all secured against their inner-city Melbourne family home, in which they held significant equity.
I felt confident that I could structure these facilities better, acquire the funds for the investment property, and help them save significantly on both interest and fees.
THE SOLUTION
The execute the strategy, the key was to refinance the client's business loans at home loan rates and cash out the funds required for the inestment property through equity release, without having to use their property as security.
The solution was relatively simple – one single security and one single package facility that incorporated three loan splits: one personal P&I home loan facility; one P&I investment facility to refinance both existing business loans; and one interest-only, 100%-offset cash-out investment facility to help secure the new investment property purchase.
I workshopped the deal with Macquarie Bank BDM Dom Cuzzupi, who in turn worked with the bank’s senior credit team, and it was a fantastic team effort to make the deal run smoothly.
The client loved the strategy, especially as our calculations showed that we could save them between $10,000 and $15,000 over two years.
In consultation with my client’s accountant and Dom and the team from Macquarie, the proposed solution provided the right balance between maximum tax effectiveness, competitive pricing and one single low package fee. However, there were more challenges around the corner.
I needed the financial statements and tax returns for several business structures, including the corporate trustee companies. Along with my mentor, Therese O’Neill of Alphabroker Mentoring, I reconciled the information, consolidating the financial picture, accounting for intercompany transfers, working out financial addbacks and demonstrating serviceability.
Adding further pressure, the investment property auction date was drawing ever closer. It wasn’t until two days before auction that we received the unconditional finance approval. The clients were over the moon.
Pricing across all three facilities averaged less than 4% pa and achieved double the savings we had originally projected. We also secured a number of perks, waiving ATM fees and international credit card transaction fees, and securing a free, fully functional 100% offset account.
THE TAKEAWAY
There were a number of things I learnt from this deal. Firstly, it’s critical to work closely with your BDM and senior credit team, and my mentor was invaluable as we worked through 300 pages of financial information – a job that would have taken me weeks to complete alone. Also, my administration and loan manager, Ali, played a vital role in making this deal happen; I’m very thankful she is on the team.
Macquarie’s commitment to digital banking helped expedite the process. Not only are its internet banking and APP technologies first-class, but it uses DocuSign and delivers documents electronically. All these things helped us meet a very tight auction deadline.
However, the key takeaway is not to take anything at face value. Michael initially wanted to talk about a $250,000 loan, but after digging a little deeper the deal snowballed to $1.835m.
Cases like this demonstrate that, with the right expertise and support, brokers can provide enormous value for their clients and far superior service to what most major banks can offer.
Luke Cieslak
MD and broker,
Hype Financial
