MPA Top 100 broker Sze Chuah is the director of MLS Finance, a Sydney brokerage specialising in property companies and investors. Chuah navigated a tricky situation to help a property investor, who had a sizeable debt on his home, refinance his loans.
The client, whom we will call David, is the general manager of a large but family-owned construction services firm. He came to MLS Finance through a referral partner, who advised us that David had approached them having had some previous loan applications knocked back over the past year.
David is a pleasant and easygoing guy, but he was frustrated with the applications that went to residential and commercial lenders, which unfortunately did not succeed due to his complicated situation. He seemed to be a bit worn out and defeated, and he said he was starting to think there was not going to be any solution. Nevertheless, he decided to reach out through his property advisers and speak to us anyway.
David is a sophisticated property investor with a significant investment portfolio of more than 20 properties. Additionally, he also has a sizeable debt on an owner-occupied property. He not only wanted to improve the terms across all his loans but also to position himself to continue to capitalise on opportunities in the property market and buy more investment properties.
David wished to consolidate a large part of his portfolio as much of it had rolled onto principal and interest and was on high interest rates with several third-tier lenders. What appeared to be a simple task of finding a lender that allowed the servicing of such a large amount of debt became an extensive credit search. Despite his significant debt and repayments, David had an executive-level income, which showed that he had the means to repay affordably.
David was not the owner of the construction business. However, a significant portion of his salary was from bonus income, with the complication being that this bonus income was attributable to a non-equity profit-share arrangement. Therefore, and given that this is relatively uncommon, most lenders were not willing to consider his situation.
Based on MLS Finance’s experience with other tricky deals, we knew that we needed to get a level of assurance from a lender before submitting the application. First of all, we workshopped the scenario with credit hotlines and business development managers. We had a number of third-tier lenders who were happy to accept the income; however, we were also pleased when one of our mainstream lenders, Bank of Queensland, also confirmed it was comfortable with the type of income. Our BDM, Max Schuster, had sent the scenario to Bank of Queensland’s credit team, and they eventually confirmed that they would accept the deal.
Upon submission, with more than 20 properties there were an enormous number of documents that had to be verified. Still, once our associate Jarrod Mackenzie and our loan processor Jay Villegas got through the paperwork and submitted the deals, we managed to get the application submitted and approved. We also had some assistance from Schuster, our BDM at BOQ, with whom we have had a great relationship with for many years.
David’s interest rate savings alone were over $65,000 a year, plus he received a $2,000 rebate for his troubles. Our team was also extremely pleased and proud of the outcome, not only because we were able to help a client with an extensive portfolio and complex situation, but also because the result meant so much to him.
He was a bit surprised when we presented him with the approval, and became quite excited and expressed his gratitude. He said he wished he had just come to see us from the start.
Don’t give up. We often find that with a scenario that makes commercial sense, even though most lenders would not do the deal, there is often a solution. It involves presenting the scenario and/or client in a particular light and providing a story and mitigating circumstances for the lender’s risks.
Don’t burn your relationships. The fact that we had a strong working relationship with a number of lenders allowed us to get straight answers from them. We have had many tough situations with delays and items missed in years gone by, but maintaining a reasonable and professional working relationship really helps when trying to pull favours.
It was not the easiest of deals, but certainly the size and financial impact it had on the client definitely made it worth the effort.