I’ve been in the industry a long time, and I arrange business finance, vehicle and equipment finance, as well as residential loans. But this particular refinance is probably one of the hardest residential loans I’ve ever done.
I knew the borrower through her parents, who I’d helped with a loan many years prior, and I’d arranged a mortgage for this client and her former husband about five years earlier as well. They had split up and I hadn’t heard from her for a while, then she approached me and said she wanted to refi nance her home following the divorce.
Sounds straightforward, right? Well, this one involved a home loan that was split into two facilities, together with four personal loans and eight credit cards – all rolled into one mortgage.
We were working with multiple lenders: Westpac, Citi, NAB, Virgin and more. The borrower had fallen into a financial mess following her divorce. She told me the split was very messy and she had been scrambling to find any sort of funds to live off, which explained her multiple personal debts.
She had ended up in this very complicated financial situation, but the debt wasn’t all hers. Her new partner had some debts also, and they were joining forces financially and rolling all of their credit cards and personal loans into the one mortgage.
By the time she reached out to me, she was robbing Peter to pay Paul all the time. I don’t how she kept track of all the different due dates. She contacted me at the right time; if they had left it another six months, I would hate to see what position she would be in now. She was very stressed, and I think if she hadn’t taken action on her situation she could have fallen so far into arrears that we may not have been able to help her.
A lot of lenders wouldn’t even touch this refinance because of how complicated it was. However, once I explained the situation in detail, I found some lenders who were willing to come to the party.
The client had some equity in property, so the final loan amount we were requesting came to 80%, which was good as that meant no lenders mortgage insurance was payable. Ultimately, with their two incomes it all still serviced. It was a matter of fi nding a lender that didn’t perceive the client’s messy financial affairs to be high-risk.
This one involved a home loan that was split into two facilities, together with four personal loans and eight credit cards – all rolled into one mortgage
Fortunately, we didn’t have to go to a lender that was charging higher rates, as with a bit more research I was able to talk to the BDM at MyState, who confirmed we could get it across the line.
In the end, it took about five months to get it all sorted, as there was so much paperwork involved. The banks needed three months’ worth of statements, and each statement was three or four pages long, so multiplied by eight credit cards and four personal loans it was reams of paper.
Along the way, the client’s partner did say a few times, “Hmm, I didn’t know about that debt.” That happens sometimes; I’m not trying to say that people hide things from their partners on purpose, but sometimes they’re just too ashamed to reveal it all.
I then had to sit down and tell the client, this is it – if you go down this track again, you won’t be able to refinance again, or if you do, it will be at a much higher interest rate.
This deal took place around 12 months ago, when it was much easier to get credit. The industry has tightened things up, and it’s far harder now to get into this sort of trouble with credit cards and loans. A few years ago, it was so easy to obtain credit, and this shows how detrimental that can be to your life.
The couple’s relief at how much money they were going to save was palpable. I think in the end we reduced their monthly obligations by $2,000–$3,000. They could never have got ahead with that noose around their necks, and today they are so much better off . They also have a plan to pay off the loan as quickly as possible so they are not paying these credit card debts for over 30 years.
Obviously, not all of my clients are like this, but this is a great example of what broking is all about and the assistance we can offer to the public, who won’t get the same result if they only go directly to their bank.
As brokers, we can imagine these clients going into a bank and the bank saying, “No, sorry, we can’t help you”. But what we can do as brokers is search for a number of options and provide solutions that a customer can’t always access by going straight to the lender.
Founder, KT Financial Services