A CASE OF PERSISTENCE WITH STRONG REWARDS.
Key Mortgages was launched with a vision to be a boutique mortgage broking firm, focused on working with the individual needs of our clients. One of our strong values is that we help people buy houses, not just get loans. We would like to share with you a case study where we truly relied on this value every step of the way and didn’t give up until our clients reached their dream. Sometimes we work with clients for many months, even a year or more until they land on a best purchase strategy and buy.
Two clients approached us with strong motivation to buy their first home together. They had been working hard for many years, and saved up a little deposit along with good KiwiSaver.
THE BIG PROBLEM
The clients had reasonable combined incomes and stable jobs, but also some aspects in their history which we determined would be evident from their bank statements and credit check. This needed to be front-footed in the loan application so that the bank could see a full and fair picture of the clients’ situation.
We spent some time working through how they came to be in their current situation, and what their plans were for the future. With a solid understanding of this, we sounded out several different bank managers as to the merit of some of of our proposed scenarios and worked through the various bank calculation tools we have on hand as to their affordability.
Having done all this background work, we then presented their loan application with backup explanations of what had occurred, along with why this would not be a problem in the future. The wait was nerve-wrecking for our clients, but they were overjoyed when the good news came back. We managed to get them approved to a potential purchase price and corresponding maximum loan amount they were comfortable with. Having a target pricing in mind, their real search for property began.
THE HOUSE HUNTING JOURNEY BEGINS
Over the following weeks and months, the clients looked at dozens of properties. They found several properties they were considering and priced well within their budget. The ‘best priced’ of these typically were needing major work or in areas that would have tough resale value. When they were finally keen to make an offer on one of these properties, another unexpected challenge set us back. Due to a combination of their deposit size combined with future remediation levels that couldn’t be quoted that particular property wasn’t acceptable to lenders.
With determination to find their home, the clients kept hunting. One of the properties they were keen on had several interested buyers and was going to multi offer. We were so excited they finally found a home that would be suitable for them. We see many multi-offers though and know that it can be a tricky process. Having been working with them for this long our whole team was very invested in their success and wanted to put them in the best position maximise their changes at the multi-offer. We talked them through how multi offer situations go, and what levers they could tweak other than the purchase price to make their offer more attractive. We discussed the pros and cons of including or adjusting the timeframes of different sale and purchase agreement conditions so they could make an offer they felt gave them enough due diligence whilst still being appealing to the vendors.
The clients also looked at a couple of properties which were being auctioned. We talked them through auction process, and some typical bidding strategies. We confirmed the property and auction requirements, then got them fully approved for this property too.
Unfortunately, the above properties sold to other buyers above our clients’ maximum budget and with the market moving so quickly they got priced out of the market.
JOURNEY TAKES A TURN
Eventually, after several months, they advised us they were considering the option to purchase property from family at a discounted price. This was in part due to family good-will and also because being a private sale, no real estate agent and marketing costs were involved. Because this was not a typical situation it needed some through preparation before being presented to the bank.
We worked with them and the family while they were coming up with a purchase figure that suited all parties. The family were lovely and supportive but also wanted to work on an option that was both simple and fair to all, given the indicative open market value.
As we often experience in these situations, the clients had many questions about how this can work and having a gift or family loan. We discussed with them our experiences around other clients with these and some options and wordings that are acceptable to banks prior to engaging their solicitors.
Being a private sale, they needed a valuation as usually is the case. We helped get them an independent indication of valuation so they could work on some reasonable figures with their family.
The Key Mortgages team have worked with over a hundred solicitors and conveyancers over the years, so were able to recommend some good solicitors to provide thorough, independent legal advice. This allowed our clients to quickly work through with a good existing understanding of some of their options available and knowing the basis of their proposed agreement.
LOCKING IN SOME GOOD RATES
Everything was falling into place, though with their low deposit they’d be paying higher rates than what we can potential negotiate. Given the slightly discounted figure which the property was being exchanged, we provided a solution where the bank could recognise the maximum value of the property, even though the clients weren’t technically paying that price. This allowed us to negotiate the best rates available for them plus a super strong cashback to cover legal costs plus some spare.
Once their loan was approved, we helped work through preparing a loan structure that worked well to allow them to review the value of the property again in future and as a result minimise the interest they’d be paying.
As part of the approval process, we helped clients to arrange independent insurance cover and quotes for worst case scenarios both for their house insurance and personal insurances.
THE CLIENTS HAD AMBITIONS
From our ongoing discussions with clients around their future goals and plans, we were aware they wanted a property with some specific improvement and development goals. We advised the clients of a balance of options to allow them to take the maximum lending approved currently, to pay the minimum interest rates, and to allow future access to funds to also do their project.
Following their full approval and once the loan amount and rates were confirmed, we also worked through the pro’s and con’s of having a floating / revolving credit facility. This allowed future re-draw of funds for the building project they had planned, without needing to jump through additional re-approval hoops or potential new criteria hurdles, while not being charged monthly fees or interest on having the facility available.
EVERYONES A WINNER BABY THAT’S THE TRUTH
The clients and their family were stoked with the outcome and structure provided and continue to be loyal clients and have referred some friends of theirs back onto us for the same levels of service.