LoanBrix broker Shelley Beggs arranges three loans for a couple who want to build a holiday home, upgrade their family home, and secure school places for the kids
In April 2017 I emailed through a fixing stage invoice to CBA for a construction loan for my clients – a couple in their 40s with two children, who were building their dream holiday home on the east coast of Victoria.
A few weeks later I received an email from the couple explaining that they had decided to sell their current home in the Dandenong Ranges and move southeast of Melbourne to be closer to the school of choice for their children the following year.
They asked me to do some numbers to see what their budget was. I did the calculations and, just as I was about to send through the information, I received another call saying they had signed a contract to buy a property for $986,000 with a three-month settlement.
It was winter in Melbourne and they were now under pressure to sell their home in the Dandenong Ranges – a far-from-ideal situation.
I was asked to investigate bridging finance with CBA to alleviate the pressure of such a short time frame.
The client’s existing loan was with CBA and our challenge was that we needed to use the holiday home as security in the application for the new loan.
The final inspection had not yet been completed for the construction loan as the couple were supplying and installing their own benchtops and had yet to finish the project.
I explained to them that we needed the house completed as soon as possible for the final building valuation.
Then it was time to crunch the numbers. The couple’s current mortgage with CBA was for $660,000, and we calculated that they needed a bridging loan of $950,000 to make this deal work.
At this stage the client anticipated their home would sell for around $730,000. In early July they received an offer, but it was for $670,000 – quite a bit less than they had hoped for.
However, they accepted and arranged settlement for one week after settlement of the new property.
I suggested that we could avoid the bridging loan by organising a same-day settlement, but they opted to keep the one-week gap to give them some breathing room and hopefully make their move less stressful.
The loan was approved and I submitted the signed loan documents on a Sunday. The CBA system stated that the documents had been received and everything appeared to be on track for settlement the following Monday.
Then at 8am that day I received a panicked call from the conveyancer, claiming that CBA was not ready.
The file had been sent back to the assessor because the purchaser had placed a caveat on the client’s home.
I called the conveyancer who confirmed the caveat on the title – something that is quite normal in Victoria.
I was reassured that it would drop off at settlement, but when I called the assessor in South Australia he said he had never come across this before and there was no way he could sign it off without removing the caveat.
I then had a BDM from the lender step in to confirm with the assessor that this was common, and, miraculously, settlement went through that same day. I then began work on the next settlement, sending through discharge to CBA.
At 8am on that day I received a panicked call from the conveyancer, claiming that CBA was not ready
I was informed that a letter of variation needed to be signed by the clients as security was being substituted. Again, with the help of the BDM we had variation documents signed by the clients at their local branch, attached to the file, and checked for settlement.
By this time the clients were very stressed and tiring of what they felt were endless requests, but I managed to keep their spirits up by explaining that bank processes needed to be followed and due diligence was required in such situations.
At the last minute we managed to get settlement booked in for the same day.
It was a huge relief for both me and the clients that everything ended well.
While this deal appeared to be straightforward at first, there were many hurdles and curve balls along the way.
Knowing what I know now, I would not recommend taking on a bridging facility for one week. It was a lot of work and didn’t reduce the overall stress levels for anybody involved in the deal.
However, the deal went through and the family managed to achieve all their objectives – they built the holiday home, upgraded their primary residence, and their children enrolled in an excellent school.
All in a (few) days’ work for a broker!