Specialist lending is an alternative solution for a wide range of clients who can’t get mortgage through standard documents assessment in banks. For example, borrowers who just start their business normally don’t qualify for 2 year ABN requirement in normal lending, while specialist lending/ low doc caters to these borrowers.
The basic principles of lending don’t change under the NCCP – serviceability and loan suitability assessment is still undertaken, with Specialist lending allowing lenders to take a more liberal approach to assessing someone’s credit worthiness taking into account their story and their current situation. Following is a case we recently dealt with.
Kim, a CPA accountant, quit her job and opened a spa last year. She wishes to purchase a house worth $1M for investment. Having only operated her business for a year, Kim realized it was difficult to prove to the lender her profit, as most major banks require 2-year tax return. Kim came to us asking if there’s any solution for her.
our consultant examined the client’s last year’s tax return, concluding that the taxable income wasn’t sufficient to serve the new loan. Kim explained that she invested a lot in the shop in the beginning, so the financial performance was mediocre in the last financial year. However since the ongoing cost of operating the shop is low, the performance is much better this financial year.
Our consultant requested the recent 2-quarter BAS and worked out the assessable income. A pre-approval was successfully obtained from a major non-bank lender. Knowing exactly how much she can borrow, Kim is actively attending the auctions. Our consultant will review Kim’s financials in a year’s time, and will determine if she’s eligible for another product with lower interest rate when her age of business has reached 2 years.