We have two long-standing clients who are young, middle-income earners, making their money work for them and investing very wisely. They own several investment properties; 4 in a partnership, 2 in individual names and another 4 in a trust. They sold 2 properties in their existing portfolio, replaced them with 2, more expensive, yet more lucrative, properties and approached us for a home loan to finance their new acquisitions.
On applying for the home loans, we obtained declines from all 4 major banks, with reasons being:
- Insufficient available income (the banks were only considering a percentage of the rental income)
- Wrong client type (property purchased in the name of a trust)
- Only self-employed trustees would be considered (our clients had both full-time employment)
- Product not permitted (this one still baffles us)
Despite all the reasonable and unreasonable reasons, we managed to obtain an approval. This is how we did it…
All banks assess rental income differently. While some will not consider any rental income on properties that are not bonded to them, others will consider 40% to 80% of rental income. In getting the banks to consider a higher percentage of the rental income, we focused on the clients' track record as seasonal investors and landlords. The fact that the lease agreements were renewed annually and they had long-standing tenants, played in our favour.
The clients’ declared monthly obligations on their home loan application differed substantially from what the banks had obtained from the credit bureau reports. We obtained full credit reports on both clients and meticulously compared this to the figures the banks were using. Several expenses had been wrongly allocated, reducing the clients’ affordability.
The two properties being replaced had high running costs. These costs were well documented, enabling us to prove to the banks that despite having serviced the existing bonds and related expenses on the sold properties, the clients still managed an investment portfolio that is cash flow positive.
The home loans were approved.
This is why you should use the services of a professional bond originator such as Property Factor! It is our ability to represent our clients positively and where there is merit, fight their case relentlessly, that guarantees our unbeaten track record.
"You will never need to be apprehensive while waiting for your home loan to be approved. After we have meticulously gone through your documents and confirmed that you will qualify for a home loan, very few credit managers would argue differently."