The clients are owners of a commercial carwash business operating in Sydney and interstate for the last 15 years. They have been running this business all while raising their 4 dependent children.
Over the years, they have accumulated an investment property portfolio and the time came when they were looking to build their first family home.
When the accountant first referred the clients to us, they’d already purchased vacant land lots for the home build. A deposit and stamp duty had already been paid.
To preserve funds for other investments, the clients required 80% LVR. The total loan required for land and construction was just over $1M.
We obtained all supporting documents and information from the clients and the accountant to provide a personalised assessment.
We arranged the meeting by also inviting the accountant to attend so that advice could be provided to the client for decision-making at the same time.
This was not a standard residential loan and to get the deal over the line, we tackled the following three main hurdles.
Challenge 1 – During the client meeting, the accountant gave advice that the vacant land lots purchased in personal names should be switched into a new company name. However, contracts already exchanged, with the deposit and stamp duty paid.
We immediately contacted the solicitors to start the process of switching to company name. Simultaneously, we went ahead to prepare the credit paper.
Challenge 2- The second issue that arose relates to the female client’s recent telco default of >$1,000 unresolved which would have made it a challenge for the deal (i.e. 80% LVR requirement) to be accepted into a bank.
We prepared a detailed credit paper which identified all the exceptions we required for the application to workshop with our BDMs.
Once we received support from our BDM we started the application and tightly documented all required supporting documents and information.
In the application, it was vital that we also provided a detailed explanation regarding the telco default with supporting documents.
Challenge 3 – the next hurdle related to the clients financials – their business had a large increase in profitability between FY17 and FY18. Given the big jump, normal bank policy would be to use max 120% of previous year’s income.
To put the clients’ best foot forward, we requested that the average of two years to be used for servicing.
This case study showcases our capability to handle a non-standard loan scenario and to be able to think on our feet to solve problems during the loan process.
We worked closely with the accountant and solicitor to ensure all changes or amendments had been executed accurately, without putting any stress on the clients.
While the telco default really worked against our clients’ favour, we provided the bank with a detailed summary of the circumstances and also ensured that default had closed prior to Formal Approval.
Even though there was a large increase in profitability, we requested the use of the average of last two years as we could demonstrate a continued growth in the company.
We presented the deal well to the bank which required minimal rework.
Formal Approval was issued not long after, and we managed to ensure a smooth settlement for the clients.
Settlement went ahead smoothly, and construction of the clients’ family home began shortly after which we also assisted with.
Construction has now also been completed and our clients will very soon be moving in their first family home.
