A site manager had signed a $1,175,000 contract with a 14-day finance clause. He wanted to keep his current property as an investment, and most of his deposit was a $280,000 gift. Approved with Firstmac inside the clause.
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A site manager with around 1.5 years at his employer and more than two years in design and construction, on a base salary of $165,000. He is also a director of two companies: one that has never traded, and a construction business that trades profitably and covers its own costs.
He is careful with spending, has built strong cash savings, and already owned a property that he now rents out for $815 a week.
The contract was already signed, so there was no room for an application that needed reworking.
He was also not selling. His existing home loans stay in place, so the new loan had to service on top of that debt. How a lender assesses existing debt decides how much can be borrowed, and he needed enough capacity to reach the purchase price. Most of his deposit was a gift.
| Item | Position | Issue for a lender |
|---|---|---|
| Purchase | $1,175,000 contract signed | 14-day finance clause, 30-day settlement |
| Existing property | Rented at $815 a week, loans staying in place | New loan has to service on top of the existing debt |
| Deposit | $149,000 cash plus a $280,000 gift | Gift has to be unconditional and evidenced |
| Directorships | Two companies, one trading | Lender needs comfort neither carries liabilities |
At the time of this application, Firstmac assessed existing home loans on their actual repayments and applied a lower assessment rate to new lending. That gave him significantly higher borrowing capacity than lenders that assess existing debt at a buffered rate.
The trade-off is rate: its rates were higher than those of the major lenders. It was the suitable option because it made the purchase possible while keeping the first property.
| Metric | Figure |
|---|---|
| Lender | Firstmac |
| Outcome | Formal approval, inside the 14-day finance clause |
| Purchase price | $1,175,000 |
| Loan amount | $800,000 |
| LVR | 68% |
| Product | Standard variable package with offset |
| Existing debt assessed on | Actual repayments |
| Salary relied on | $165,000 |
| Rental income relied on | $42,380 |
| Contribution to the purchase | $429,000 |
| Status | Existing property kept as an investment |
Keeping a property as an investment? See debt recycling for property investors and which loan to pay down first.
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