Background
Our clients, a married couple with four dependents, were seeking pre-approval to purchase their first home with a 15% deposit. When their application was declined by their main bank, they turned to alternative lending options.
Challenges
The clients’ main bank declined the application as their existing debt, high LVR requirement, and income sources did not meet the bank’s lending criteria.
- $40K in short-term debt exposure, with minor late repayments recorded over the past 12 months
- Debt obligations with IRD (Working for Families), small collections, buy-now-pay-later facilities, and other short-term lenders
- Requirement for 85% high LVR lending
- Income structure partly reliant on benefit income and commission-based earnings, which were not considered favourably by the bank
Mitigants
Working closely with the clients’ adviser, we identified the following positive factors to demonstrate their capacity to service the loan:
- Strong and stable employment history, with regular commission payments evident
- Consistent benefit and child support income
- Solid UMI despite short-term debt, with a conditional approval from their main bank to consolidate this debt—further improving their cashflow position
- All short-term debt repayments up to date and on time for the past six months
- Application falls within lending guidelines
Solution
We provided the clients with a conditional pre-approval under our long-term Specialist product. This gave them clarity on their maximum borrowing capacity, enabling them to shop for a property and make offers with greater confidence.
Since approval, they have successfully identified a property, giving them the opportunity to step onto the property ladder sooner rather than waiting.
During the loan term, the clients will also be able to establish a strong mortgage repayment history, positioning them well to refinance back to a main bank in the future.
Pre-approval conditions include:
- An acceptable Sale and Purchase agreement
- Registered valuation
- Gifting certificate
- IRD, buy-now-pay-later, and other collection debt to be repaid prior to our settlement
LOAN AMOUNT
$652,800
INTEREST RATE
8.34% p.a.
TERM
30-year Principle & Interest
LVR
85%
ADVISER FEE
$6,528
AVANTI FEE
$705
CASE STUDIES - PROPERTY LENDING
“Our Specialist Long-Term Mortgage is designed for clients who don’t meet our near-prime profile, due to factors such as defaults, collections, repayment history issues, and other outstanding bills or loans. Our comprehensive credit assessment process allows us to determine clients’ risk profile and tailor solutions accordingly.
In this case, we not only provided the lending needed to help the clients get on the property ladder but also set them on a pathway to improve their credit profile and qualify for a lower interest rate in the future.
If you have clients in a similar situation, get in touch with your local Avanti BDM.“
Harriet Wright
Business Development Manager, Auckland South and Waikato