The director of Yarra South Finance explains how she juggled two lawyers, three properties, one loan a foreign income and a Telstra outage
When you’re a new-to-industry broker, it is daunting going in search of that very first client. After signing up with Connective in February 2018 I started by networking to spread the word about my work and new business.
While networking over lunch, I met my first clients: Australian residents with school-aged children who were looking to buy a holiday home.
They had two homes in Melbourne – one owner-occupied and one investment property – which had equity that could be used for this deal. As the clients worked for an international law firm there was foreign income involved.
They had already seen their ideal holiday home and were considering making an offer of around $1.1m; however, the deal soon became worth much more.
Unlocking the equity in the two Melbourne properties required a refinance, and, after calculating the sum of their existing mortgage debt, my first-ever deal ended up being just over $5.5m.
After our initial meeting, the clients had back-to-back work and travel commitments for a month. Then one Sunday night in late April I received a call saying they had signed a contract of sale and settlement was in 45 days.
I included all the client data in Connective’s Mercury database and generated a list of lender options, but it soon became apparent that there were too many nuances and this approach was not going to work.
I then spoke directly to the BDMs of eight potential lenders. This was time-consuming but necessary, as ideally I wanted to present the clients with more than one option.
This all took place against the backdrop of the royal commission, the findings of which were dominating media headlines and causing ripple effects in the lending space. Rules were being followed to the letter, particularly around living expenses, and I faced multiple challenges.
Firstly, the LVR ended up being 77.4% when the banks were demanding 75%, because of the involvement of properties worth more than $2m. Secondly, the clients required interest-only across all loan splits, including their owner-occupied property, and wanted the husband to be named as the borrower and the wife as security guarantor.
Fortunately, the foreign income issue was resolved as the majority of their partnership profits for the preceding tax year had been paid from Australia. If this hadn’t been the case their lending ability would have been compromised by perceived serviceability.
Despite the complications we got the deal over the line with Macquarie within 45 days, yet it was not without additional challenges.
As I was busy collating all the documentation and pushing for the previous year’s tax return, the clients were now being asked for the full 10% deposit. Understandably, they didn’t want to pay this before finance approval, so the payment date for the deposit balance was pushed back by a week.
With that hiccup addressed, it was on to the next. A Telstra outage delayed us sending the loan documentation for signing, which was particularly frustrating given that the couple’s frequent travel demands had already caused issues with signings.
Then the clients’ existing bank – one of the big four – started to pressure the couple to get the loan from them. In the end they couldn’t match what Macquarie was offering, but it did cause a further complication.
Finally, although their final serviceability test score was 1.01, the couple were instructed to cut down on living expenses and were declined for a second credit card, which they did not expect.
While my former career as a corporate lawyer helped considerably, I cannot stress how important it is to have the right mentor. Without the assistance and dedication of Therese O’Neill and her team at Alphabroker Mentoring, I may not have been able to do this deal.
I also cannot stress enough the importance of taking detailed notes – I recorded 170 file notes for this transaction.
The complexities of the deal were such that, if it were ever audited, there would need to be a sound trail of evidence as to what transpired during my numerous interactions with all parties.
I am pleased that I was able to offer a solution to these clients as they have many demands on their time. I had to balance keeping them informed with shielding them from the stress – there is an art to this!
Hopefully, with the first deal providing such a challenge, future transactions will be a breeze…
Yarra South Finance