Understanding the concept of Common Debt Reduction and/or Alternate Servicing and having this policy applied with all the accurate supporting documents
Knowing that the client’s parents had sufficient funds to settle on a new home without a loan but still willing to share a solution to help them obtain a loan.
THE SITUATION
The client’s parents had sold their existing properties, one of which was their principal place of residence
The parents were seeking a new home which would allow them to be closer to the client and their grandchildren
The parents wanted to borrow a small loan amount so that they could save some of the net proceeds from their properties for a rainy day but if not available, they would be happy to use all the funds
We had worked with the clients previously so had most of their current information available, but it was really important to understand the parents current financial situation to determine if it was suitable for them to take out a loan, given their age.
THE CHALLENGE
The parents were working but only on a casual basis as the industry they were in had been impacted due to Covid
The client’s income was therefore needed to help with her parents, however she had her own loan commitments which had exhausted most of their existing capacity to take on a new loan
The parents had exchanged on a purchase with settlement that was due within 4 weeks, however the lender had a minimum turnaround time for an initial assessment of 4 weeks
Lender chosen not only had a long turnaround but also only allowed a one-touch approval, which meant if there were any incorrect documentation or information the loan would not be pre-approved and they will not look at the application again, until you had an exchanged contract of sale.
THE RESULTS
The client had been clear from the get go their intention to move quickly as the parents were interested in a few properties, one of which will be going to auction by the end of that week. To show their commitment, the parents had already sold their existing properties with settlement occurring later that month
Based on the information we gathered we shared the solution to the client and her parents which would allow them to take out a loan and this would only be possible by demonstrating that the client’s husband has the financial ability to repay 50% of their home loan debt
Once the lender was chosen it was important to make the decision to apply for a pre-approval, irrespective of whether the client would be successful at auction to not waste any time. The submission of the pre-approval was more complex than your usual loan as we had to demonstrate the clients husband’s ability to repay 50% of their joint home loan; and the level of detail in the instructions put forth to the client was incredible
During this time the client and her parents had exchanged on a property and paid a 10% deposit without hesitation and agreed to settlement in 4 weeks. This meant we had to prepare for another solution and upon liaising with our lender BDM the client was able to use their own funds to settle first and still take out the loan afterwards
Even though the settlement process did not follow the usual steps, we were able to successfully take out the loan for the client and her parents, while they settled into their new home happily.
