A single female was looking to purchase her first home. The properties she liked were priced between $650,000 – $700,000. She had saved a deposit of $33,000 and her parents were happy to gift her $30,000 towards the purchase. At the time, the property market was very strong and property prices were increasing. She believed that if she did not act quickly, she may be priced out of the market, so time was of the essence.
To complete a purchase at $700,000, the client required a minimum deposit of 5% of the Purchase price, plus funds for the Purchase costs ($28,000)*. In addition, to have the loan approved with most lenders, she was required to pay the Lenders Mortgage Insurance (LMI) premium upfront (approx. $25,000).
The banks also needed the 5% deposit to be qualified as ‘genuine savings’. This means the money needed to be saved over a period of 3 months or longer with no lump sum deposits.
Finally, her parents were not able to be able to assist with a Parental Guarantee Loan (see Case Study 2).
*Based on Victorian Stamp duty. Government fees vary by State.
Firstly, the client needed to save an additional $2,000 to cover the 5% genuine savings deposit shortfall. To do this, she cut back her lifestyle spending to the bare minimum and was able to save this amount in 3 weeks.
During this time, her Vision Broker presented two options for her consideration:
The 2nd Loan product allowed the client to proceed with the purchase in a significantly shorter time frame, with the compromise being that she would have to pay a higher interest rate on this loan until the loan value dropped below a certain percentage of the property value. As part of Vision’s ongoing service, the Broker was regularly in contact with the client to ensure her rate was reduced as soon as the eligibility criteria allowed.
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