Poor account conduct preventing lending to complete new build and consolidate debt

Background

A customer required $440,000 to refinance their existing mortgage, release equity of $40,000 to complete the finishing touches to their newly built owner-occupied home and to repay and consolidate $45,000 of short debt incurred due to unforeseen cost overruns and delays in the construction process. This debt included them going slightly over their credit card limit and falling behind with payments.

Challenge 

  • Over limit on credit cards
  • Missed payments
  • Existing main bank was unwilling to assist due to poor account conduct.

Given the customer’s financial history, we weren’t able to consider this under our Near Prime product, so we reviewed it under our Specialist product.

Mitigants 

The challenge here was not affordability or the LVR, which was 61%, but rather understanding and mitigating the customers’ current financial position. The goal was to demonstrate how this funding would improve their financial situation and overall stability in the long term.

Through a strong application and write-up from their Mortgage Adviser, we could clearly understand what had happened and why.

  • Good LVR position at 61%
  • 20-year term requested to clear mortgage by retirement age
  • Updated RV, which demonstrated works required to complete and timeline
  • Only minor finishing work and landscaping
  • Practical completion certificate issued, and CCC required prior to settlement
  • Good affordability with a positive UMI position after debt consolidation
  • Good understanding and mitigants as to what had happened.

Solution 

A Specialist 1st Mortgage with a 20-year term was approved to facilitate the refinance and debt consolidation. With this funding, the customers can complete their dream home and stabilise their financial situation.

Loan amount: $440,000
Interest rate: 10.35% p.a.
Term: 20-year 1st Mortgage
Avanti fee: $705
Adviser fee: 1%
Commission: 0.80% with a 12-month clawback period
LVR: 61%

Rates and fees were valid at the drawdown of the specific loan facility in each case study, new loans are subject to the rate at application. A copy of our current rates and fees can be found here.  

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