A local building company referred a client to a Vega mortgage adviser. Client wanted to buy an off the plan house with a fixed price contract. The client, a solo mother with a stable income and a substantial inheritance, had been dealing with another broker (not Vega) for approximately six weeks who had not been able to get funding approved for the client.
Client Profile:
- Solo mother, aged 48, with an 11-year-old daughter, earning a reasonable wage.
- LVR was 54.90%, good deposit from inheritance.
- Not eligible for KiwiSaver second chance withdrawal due to excess deposit.
- Expecting further inheritance in 6-12 months.
- Interested in purchasing an off-plan house with a fixed-price contract.
The deal was approved as a fixed-price construction in 4 days, allowing her to confirm the contract on the final day of the finance clause.
Affordability Issues:
The bank wanted to cap the loan term at 25 years rather than 30 years, and the overruns needed for the construction pushed it to negative Uncommitted Monthly Income (UMI).
The difference in lending amount for an approval was only $25,000 which was half the allowance for cost overruns, the actual lending needed was affordable.
Vega mortgage adviser approached bank with multiple options:
- Get confirmation of further inheritance due and obtain undertaking to reduce debt further if overruns were incurred.
- Proposal to modify fixed-price contract into turn key.
- Allow for a 30 year term as there was a significant KiwiSaver balance which was not able to be used for the initial deposit and would provide clearance at retirement age.
Bank granted approval for loan documentation over 30 years based on two sources of clearance (future inheritances and substantial KiwiSaver balance) that would put the loan well within the allowable UMI.
By understanding the client’s unique circumstances and leveraging various financial strategies, mortgage advisers can navigate complex funding challenges and help clients achieve their homeownership goals.
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