In our line of work we meet many different people. People from all walks of life. Rich, poor, healthy, unhealthy, educated, uneducated, theists, atheists, men, women, transgender, gay, straight, able, disabled…you get the picture. One thing I’ve noticed is the underlying reason they utilise our services.
Some of these reasons are as follows:
- We were recommended by a friend
- They know we can get them a better price than they can get themselves
- We can compare 20 lenders, right in front of them
- We do all of the running around
- We don’t charge them.
There are others but these are practical reasons that you would expect me to highlight and to push my business. But that’s not what this article is about. I’m talking about what these people’s needs are.
For example, a wealthy person may be looking for yet another investment property and wants a third party to manage the process. A person with poor financial literacy may be daunted by the choices on offer and they simple want a home loan and not be sold insurance and other high value bank products. A member of the LGBTI community may want to deal with someone that knows what they’re talking about and doesn’t judge them (most lenders are pretty good at this) and so on.
On Friday of this week, I only had a single meeting with a commercial client scheduled. It was a breakfast meeting on Sydney’s northern beaches. By the time the meeting had ended I had three messages to return.
The first caller — who shall remain anonymous — first contacted me a few months ago to see what her borrowing capacity was as she wanted to acquire the property she’d been living in for a decade and a half. My analysis of her servicing and LVR suggested that she would fail both tests (103% LVR and a servicing shortfall of around $20k). At the time, she was four months pregnant — why I point this out will become clearer later in the article.
I didn’t hear from her again until Friday’s call. Since leaving my office, she had contacted a friend who worked for a leading lender (that we are not accredited with). The short story is that the lender, having initially approved their application, had been suspicious enough to ask them to verify parts of their story. They were unable to.
A deposit was due on Monday. Failure to pay the deposit would result in the property going back on the market. The caller was asking for my help. By this stage she was very stressed and very ill. I estimated that she was well into her third trimester.
Not wanting to stress her even further, I started the process of talking her down from the property ledge. I asked her why it was important and why she was putting herself under so much stress. She explained that over 15 years, she had already paid the property off once for the landlord (via the weekly rent), she didn’t want to wake up 15 years from now with a 15 year old and not have a roof over her head.
Why this particular property? Because…as she hesitated, I could hear the penny dropping.
By the time the conversation ended, she had come to the conclusion that it was just a property and not worth putting herself or her child at risk. I promised to look into it after my next meeting (which was with my second caller) but warned her not to get her hopes up.
Meanwhile, the lender, having put her through all the stress, amended the application to reflect the real situation and actually approved the loan (a loan that had no business being approved — they probably thought that approval was better than negative press).
I tell this story to highlight what happens to many people in the current market. The media even has an acronym for it — FOMO or Fear of Missing Out.
The second caller was someone who was onto their second investment property. He had almost no debt. He and his wife have a net worth of around $4-5 million but were arguing with a major lender about borrowing $980k. The lender was only willing to lend them $920k. Could we help? Of course we could. Our borrower had made the mistake of walking into the bank that he banks with — therefore he only had access to their products and policies. He didn’t get a view of the entire market which we were able to provide him with.
The third caller, wanted to refinance because they felt that paying 4.75% in interest was too high. They’re right of course. They had asked their bank for a reduction, the bank had refused. Adios.
As I was driving home later that night and after Friday turning out busier than I first thought, I reflected on the juxtaposition of my three callers and how they had completely different needs and drivers. How one had no business getting her loan approved and did, while the other was so confident, he put a deposit down on the investment property only to be brought back down to earth by his potential lender. Yet another had been stewing over his/her bank not reducing their home loan.
Here’s where the tick and flick approach by lenders lets them down. In each of the cases above, a short conversation could’ve saved a lot of stress and saved a client. Instead, each client is asked to comply with a form. We’re no different. However, what we have done in our first year of business is build relationships with lenders in the industry that will listen to us. As a result, a client that does not tick all the boxes will get a fair hearing.
I’m not complaining. The more rigid lenders become, the more there is a role for us to play. We know every borrower is not perfect. We believe it’s those imperfections that make each borrower interesting. Usually, and this hasn’t changed in over 100 years, people will do almost anything to keep their homes.