How we helped James and Lisa into their first home

Buying a home may well be the most expensive and important purchase some people ever make – and for a first home buyer it is both a challenging and rewarding journey. Challenging in navigating a complex and information overloaded lending and purchasing environment, and rewarding in people securing their first home.

In March of this year Lisa and James approached Equilibria Finance to assist them with the financing of their new home. Below is our case study on the engagement with the client, the issues they faced – and how we resolved them as well as the outcome they  achieved.

Issue

James and Lisa, a recently married couple referred to Equilibria Finance through a financial advisor, were wanting to purchase their first home. While both young professionals earning strong salaries and building their careers the key challenges were that;

• They had only been saving for a deposit for a few years – having $70,000 set aside to cover their deposit and legal and conveyancing and moving costs.
• They came to us with little knowledge on what they could afford
• They had no experience in the process involved in getting their finance in place, potential stamp duty concessions or the process in purchasing a home.

Engagement

Our engagement with James and Lisa was initially about;

• Understanding their goals and what they were looking to achieve
• Understanding their time frame and where they were up to in the process
• Understanding their borrowing capacity including their budget and the deposit they had saved.

After this initial introduction James and Lisa completed our online ‘needs analysis’ that captured the specifics about their financial situation – including assets and liabilities, income and expenses.

This gave us a platform to develop a proposal to go through with James and Lisa that included;

• 2 scenarios of what they could afford with their deposit of $63,000. At 80% Loan to value ration (LVR) and then a 95% LVR
• A cash-flow budget showing them how they could afford the repayments, under both scenarios and with the Lenders Mortgage Insurance (payable with an LVR over 80%) capitalised into the repayments.
• Presenting a proposed structure, repayments and rates.

James and Lisa had well payed jobs – but due to some recent travelling and their wedding saving for their deposit had been impacted. As such they decided they wanted to maximise their purchase price. This meant moving to a higher LVR to maximise their purchasing potential.  We budgeted with them making additional repayments over the first few years to pay the lenders mortgage insurance and facility down to 80% LVR. Being in NSW they were also eligible for the NSW Stamp Duty concessions.

Upon agreeing on the most appropriate structure and provider we set about getting a pre approval in place to ensure that James and Lisa could focus on finding their property with the knowledge they had finance ready to go when the right opportunity came up. As James and Lisa viewed properties we provided them with RP Data reports to help them understand comparable market values and the area demographics they were looking at purchasing in.

Within 3 months James and Lisa successfully made an offer for the purchase of their first home. From here we provided guidance on organising a valuation and a building inspection and introduced them to a solicitor to check through their contract.

Once their offer was accepted, we worked with the provider to ensure the finance was in place for settlement, that settlement date was scheduled in and coordinated with the parties solicitors and the funds to complete were ready for that day. We also introduced James and Lisa to a removalist.

Outcome

• Purchase price: $670,000
• Total client contribution: $66,000 (included deposit of $63,000 and $3,000 in legal fees and government costs at settlement)
• Total funds borrowed : $634,095 (included Lenders Mortgage Insurance capitalised into the loan and Stamp Duty of $4,190 – including taking advantage of the first home buyer concessions)
• Loan to Value Ratio: 94.64%
• Loan Structure: Variable rate with 100% offset account for additional savings we budgeted James and Lisa would be able to make.
• Interest Rates Secured: 3.84% variable
• Principal and Interest weekly repayment: $684.96

Anthony Landahl | Equilibria Finance

Note: This article has withheld the names of the client and some of the actual details for confidentiality.

Note: This is for general information purposes only and does not constitute advice. With all of these options there are a number of considerations outside the scope of what is covered in this article that you need to understand to ensure your personal circumstances are taken into consideration.