Background
A mother and son (aged 54 and 28) with no dependents wished to purchase a home together. They intended to reside in this home together, which is located in a small rural town in the North Island.
Challenge
The Broker had sought lending from mainstream banks but had been declined due to both applicants’ low credit scores and financial history. Both applicants were receiving WINZ benefits so mainstream lenders were reluctant to use that type of income for servicing.
Mitigants
- A sizeable cash deposit from savings (22%)
- All outstanding debts had been repaid, with the last one to be fully repaid prior to settlement
- With WINZ payments and an accommodation supplement the clients were able to demonstrate servicing
- Boarder income was also allowed given that a 3 bedroomed house was being purchased and the clients indicated that they’d be taking on a boarder
- Some debts were still being paid to WINZ, which we allowed to stay in place as would be cleared soon and factored into overall servicing
- We were comfortable with a 30-year term, as NZ Super payments would be similar to the current benefit.
Solution
Due to low credit scores and past financial history the clients didn’t meet our Near Prime criteria, but we were comfortable to offer a long-term specialist home loan.
Allowing for a 30-year term kept regular commitments low, but the clients are able to make additional payments without penalty which provides them with greater flexibility.
Loan amount: $212,805
Interest rate: 10.60% p.a.
Term: 30-year P&I
Avanti fee: $705
Advisor fee: $2,100
Commission: 0.80% with 12-month clawback period
LVR: 78%
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.