This was one of the most satisfying loan applications I have managed in my time as a mortgage broker. The couple came to me with savings of $20,000 at the height of COVID-19. They were in their late 40’s and both had a couple of ongoing liabilities: they had a car loan with a $1100 monthly repayment, and two personal loans with a $1000 monthly repayment. Both applicants were registered nurses working in aged care.
When I had a look at the initial fact find, I saw the issues that stopped them from buying their first home. The first issue was that their savings of $20,000 was not enough to begin with. The second issue was their age: the applicants were both 48 years old which meant they could only get a loan term of 22 years, assuming that they would work until they were 70 years old. The third issue was their ongoing liabilities which affected their borrowing capacity or the amount of money they could borrow.
The applicants were both Australian citizens. I knew from the get-go that the only way they could buy their first home was if they qualified for all the grants and stamp duty exemptions available for first home buyers. They also both had great employment history, having been in their jobs for more than 3 years.
They only had one request: to be able to build the home of their dreams.
I met up with them online in June 2020, which was how brokers were conducting meetings during COVID-19. I was upfront with them and told them that I couldn’t do a loan for them at that stage. The only way they could do the loan was through the First Home Loan Deposit Scheme (FHLDS), so that all they needed to do was save the 5% deposit. If they were to buy land and build a house for $750,000, they needed $37,500. They had $20,000, so they only needed to save another $17,500. They also needed to consolidate their personal loans into one loan with a longer loan term and a lower repayment. The repayment was reduced to $616 per month.
They fast-tracked their savings by taking extra shifts and working on weekends. Working shifts and weekends attracted a higher hourly rate. In six months, they managed to save an additional $30,000. In November 2020, we started the process of applying for a loan with a FHLDS participating lender.
In the 2020-21 Federal Budget, the Australian Government announced an additional 10,000 FHLDS places for the 2020-21 financial year, specifically for eligible first home buyers building or purchasing new homes. These additional places are known as the First Home Loan Deposit Scheme (New Homes) or FHLDS (New Homes). Fortunately, the FHLDS participating lender still had spots left when we started the process of applying for a loan in November. The applicants were ready and had more than the 5% required.
They successfully got an approval in principle in 3 weeks and were provided a FHLDS place. The loan term was for 25 years with an exit strategy in place. The FHLDS spot was only good for 3 months. With that, off they went looking for a block of land in a suburb they desired and a builder that could build the home of their dreams.
My next piece of advice was that the land and construction price should not exceed $750,000. By not going over $750,000, they would be able to get the $10,000 grant. My other request was that their land contract price should not exceed $400,000 so that they would qualify for the First Home Buyers Assistance Scheme, in which they do not pay stamp duty for the block of land.
I probably have the best clients to work with. They followed my advice and found a block of land for $384,000 in the suburb and estate they desire. They also found a builder that would build their dream home for $354,000. Because they signed the contract with the builder in January 2021, they also qualified for the $15,000 Home Builder’s Grant.
The land and construction loans of the applicants settled in April 2021 and we are now in the process of commencing the construction of their home. They are using the extra grants they received for upgrades to their home.
We recently had lunch and had a great time talking about the long drawn experience of getting them ready to apply for a loan, the scary feeling of applying for a loan without knowing if they would get approved for finance, and the joy of finding a block of land and a builder that will make their dream of building their perfect home.
As a mortgage broker, the most fulfilling feeling is seeing my clients take their first step in buying the biggest asset of their lives – their home. I am comforted knowing that my clients will have a roof on their head when they grow old.