Background
Clients were renting and were given notice to move out. They wanted to purchase an owner-occupied property using equity in their unencumbered rental property.
Challenge
The clients had recently started a business, and their main bank wouldn’t support their application due to the short tenure of self-employment.
Mitigants
- Strong applicants with an excellent credit score
- Over 15 years of industry experience with clients following them to their new business
- Progressive sales growth and on-target projections
- Excellent account conduct
- $350,000 in savings and investments to support business growth and living expenses
- Low LVR with two standard residential properties
- Exit strategy to refinance to their main bank or sell the investment property within 6-9 months.
Solution
Avanti provided a flexible 12-month bridging loan on a fully capitalising basis, allowing time to build the business or sell the investment property. The income was on target with their projections, making refinancing look achievable. Additionally, they had the option to sell down their investment property if required as a secondary exit strategy.
- Loan amount: $1,000,000
- Interest rate: 10.95% p.a.
- Avanti fee: $705 (consumer purpose to purchase owner-occupied)
- Adviser fee: 1%
- LVR: Start LVR 52%, end LVR after capitalising interest and fees approx. 59%
If they refinance to their main bank early, they would only incur the cost of the interest charged during the loan term and a $23 prepayment fee would apply. We used the purchase price of the new property and the Ival (desktop valuation for their existing rental), no need for an RV.