Young couple Sam and Kate were keen to start paying off their own home rather than paying rent, but had no savings. Here’s how they bought their first property.
(Names have been changed for the sake of this article)
Sam and Kate were wondering why they were paying off their landlord’s mortgage instead of their own, but they didn’t have the savings or financial history to convince a lender to give them a mortgage.
After being declined by two lenders, one a big bank and the other a smaller lender that they thought they would have luck with, they contacted a local finance broker.
During my initial discussions with Sam on the telephone, I asked him several questions to help me put the pieces of his jigsaw puzzle together. And, on paper, it certainly didn’t look like a deal.
As well as the lack of savings, the couple had a couple of other problems standing between them and a strong application: Sam had recently changed his employment and he had a small, paid default on his credit file.
The first meeting was held at Sam’s parents’ home, they discussed their needs and objectives, and mulled over whether the only option for them was to create a savings plan in order to purchase at a later date. The parents sat in the interview and wanted a solution. It became apparent that a family pledge loan facility may be an option.
This would involve Sam’s parents offering their home as collateral security.
Sam’s parents already had a small interstate mortgage on their property, so a refinance of this loan was required.
After seeking their own legal advice, Sam’s parents refinanced at a lower interest rate and also eliminated fees they had been paying by moving onto a more appropriate loan type for their situation.
The family pledge loan facility meant Sam and Kate could borrow the full purchase price and other associated costs, without paying a $25,000 lenders’ mortgage insurance. Sam and Kate are now out of their rental and have moved into their new home.
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