The scenario
This was a brand-new client who contacted us after seeing our website – she was an online lead who clicked on our website and enquired.
Unfortunately, like many other Australians, the applicant was going through a difficult time, including a separation from her partner, who she jointly owned a property with. The goal was to be able to refinance her home loan into her name only and borrow approximately $50,000 extra to be able to buy out her ex-partner entirely and take complete ownership of the home.
This was an older applicant, so borrowing capacity was the main complexity, based on her current loan term and retirement age.
It was one of those situations that make you realise the ability we have as brokers to assist borrowers in getting an outcome that will positively impact the client’s life for many years to come.
The applicant had gone to her current lender, and she was advised that, due to her age, she would not be able to access any further lending, which is when she turned to us.
When she approached us, she thought her only option was to sell her home in order to split her assets with her now ex-partner. But she wanted to avoid selling the house at all costs, so we explored opportunities to be able to refinance and allow her to keep her home.
The solution
After a thorough analysis of the client’s current and future or projected circumstances, we decided the best option was to extend her loan term to 30 years from its current 24 years. This was a deliberate strategy to keep her monthly loan repayments affordable.
However, this loan term also meant that the borrower would be liable to pay a mortgage well into retirement age.
In order to allay any of the lender’s fears, we provided a detailed analysis of the client’s exit strategy, which allowed us to overcome the main challenge: the lender being comfortable with the loan term, due to the applicant’s age. The exit strategy involved selling the property closer to retirement age and downsizing into a smaller home.
Deals like this are very special. We are dealing with far more than just numbers on a page. People’s lives and circumstances can be dramatically impacted, depending on the solutions we arrange for them
With this exit strategy clearly mapped out, the lender was comfortable that the client would have the capacity to repay, and we went straight to unconditional without any real concerns.
The ultimate outcome was that the client was able to remain in her property and buy out her ex-partner, something her bank initially told her was impossible.
The client’s only other option was to sell the property and split the proceeds of the sale, which wouldn’t have left her with anywhere near enough money to buy another home. This would have required her to rent for the foreseeable future, possibly forever.
This is one of those moments when being a broker really feels like we are able to make a difference, as we have now been able to assist this client is securing her home and ensuring a healthier financial future.
We also managed to get the client a fantastic rate that was locked in for five years, allowing her to manage her finances more effectively.
The takeaway
The key takeaway is that you should get to know your client so you can gain a good understanding of their current circumstances and future requirements.
Increasing a loan term is not an easy call to make; however, by drilling down into the client’s exit strategy, it gave us comfort that it was the right decision. With the client currently owning a five-bedroom home, downsizing to a smaller home or unit is a realistic exit strategy for some time in the future, which is an assessment the lender agreed with, and it made them comfortable about approving the loan.
The client’s options essentially boiled down to selling the property now and renting, or selling the home closer to retirement age when their asset position would be much higher and they would have the ability to downsize to a smaller property.
Every loan that we get across the line is important in its own right, but deals like this are very special. They remind us that we are dealing with far more than just numbers on a page. People’s lives and circumstances can be dramatically impacted, depending on the solutions we are able to arrange for them. We are very pleased we were able to assist the client in achieving this outcome that allowed her to keep her home.
Raj Ladher
Home loan specialist,
Your Mortgage Broker
