Edition 2 James Market News Property Report - Flipbook - Page 11
be a couple of $100,000 anyway. You’re
going to have to do some more saving,
you’re going to have to spend some
rental time and a few things, so maybe
you need to ask yourself the question
are you ready to trade up yet?
If we’re 65 years of age and we’ve
Grant: They’ve risen the same, but
got a super fund self-managed, we’re
what’s happened in that 12 months is
generating a pension, we’ve got income
that each bank is jostling for a
streams coming out of that super fund
competitive position in the market.
we can help you, and the bank will give
So, then they put competitive offers
you a 30-year loan. They’re not going
out. They may offer an incentive and
to make you enter into a five-year loan
what happens over a year is that you as
Grant: Yeah, well that’s fair enough but
because it’s going to throw you under
a customer who’s been in the bank for
everyone’s got their own story, that
a bus. You’re not going to be able to
one year drifts a little bit away from the
person might have $200,000 in shares
afford the repayments on $200,000 for
market, from the cheapest.
and then liquidate those things. Every
five years at $40,000 a year and you
The banks will only allow you to
situation can create an outcome, but
don’t want that obligation. So, we’ll give
negotiate once within every 12 months.
I think as a starting point with bridging
you a 30-year loan but then we explain
The easiest way to do it is on the
finance you have to have the equity.
to the bank you’ve got a $1,000,000 in
anniversary of your loan. So, with our
super we’re helping our children get in,
clients we have a prompt that comes
Mal: If you do it the other way around,
we’ll have the loan for a few years
up each anniversary and we often are
sell first, you’re not going to need the
and then maybe in five years we’ll take
going to our banks on behalf of our
bridging finance. There are some
a lump sum out of our super and
clients. If a new customer is going to get
issues that are perhaps
pay it off.
an interest rate of 5% and you’ve drifted
non-mortgage broker
A lot of your clients would
to 5.4%, you’re not going to get 5%.
‘A bank
issues in that you are out
also be in the position
Valuation is not
of the market, and while
where they may be
Mal: A big moving beast people don’t
a bank valuation … downsizing. They might
we assume we think we
fully understand is valuations. We went
know what is going to
have the family home
through one very complicated deal which
They’re not all
happen we don’t really
they’ve had for a lot
to be frank wouldn’t have happened if
exactly the same’
know what is going to
of years and it’s worth
we weren’t working together with you.
MAL
happen. If you’re out of
$5,000,000. They want to
I think the biggest thing that people
the market for a year or
sell that property and move
didn’t understand was the variance in
two years and the market
into a $3,000,000 property.
valuations. A bank valuation, is not a
takes off like it has many times in
bank valuation, is not a bank valuation.
the past, you’re actually creating a bit
Mal: In that situation almost all of them
They’re not all exactly the same, in
of a problem for yourself. Getting the
want to buy first because they don’t
fact miles apart and in this particular
right sort of bridging finance actually
want to be moving several times.
instance there was a 20% difference.
allows you to get a better deal buying
and a better deal selling, because
Grant: So, in that situation
Grant: Correct. They were
you’ve got greater flexibility.
I talked before about end debt.
speaking to other advisors
Let’s move on to the older buyers.
The end debt position for
and a valuation was
I get the general opinion that the older
that client is going to be
‘One of the most triggered very early on
I’ve got, the more banks dislike me,
zero. They’re buying for
in the transaction.
important things
they seem to be less keen on lending
$3,000,000. They don’t
The week after a
you can do as
a mortgage on a longer-term basis.
have the cash because
purchase and that
Do you feel that older people are dealt
that’s all tied up in their
valuation came in as
a buyer is be
with more harshly by the big banks?
$5,000,000 property.
you say 20% lower
bank ready’
They have to buy first,
than a valuation that
Grant: The banks want to understand
or they want to buy first,
we worked through
GRANT
what is your exit, and I think again, it’s
they need to borrow
via due process.
having a strong mortgage broker on
$3,000,000, their affordability
We undertook to speak to
your side to explain the story of you as
of $3,000,000 is zero. But their
the valuer and understand his
a customer in your age and what your
end-debt position from the sale
perspective of that property, that
plans are over the five, ten years.
of their house will be zero. Their
location, his thoughts, has he valued
Anyone who’s over 45 years of age
affordability of zero is 100% and a
there and make him aware of a few
applying for a 30-year loan is still
number of banks will accommodate
comparable sales. We’re only presenting
going if they paid the minimum
that arrangement.
facts and gaining information about
amount every month for 30 years.
whether they are the right valuer.
They will have finished their working
Mal: So, we are always told we should
What was really important in this
life prior to that loan expiring and then
be checking our rates. How often
case was that our client bought with a
repay to zero.
should you be checking your rates?
long settlement of six months. If we
So, obviously if we’re assisting a
What’s the best way to go about it?
step back and think about bank
client who’s 65 years of age, they want
valuations they generally last for three
to help their kids get into a property
Grant: When we advise our clients and
months and we had a falling market, a
and give them $200,000 as a deposit.
we put them into a loan on day one
market that was very uncertain with
Can that person afford money? Can
they’re effectively getting the most
where values were going. It was very
that 65-year-old person afford money?
competitive rate. But in a year’s time
hard for a valuer to put a figure on a
They’ve got equity in their house, great
they’re not as competitive as a new
particular property in this high-end area.
starting point. Now, are they still
customer.
We chose a bank using a valuation
working? Some of those borrowers
period of six months so we didn’t have
Mal: How does that work? If there
may still be working, we as brokers
to go to the market for another valuation.
have been a couple of interest rate
and as banks have to demonstrate
It’s also very important to understand
rises do they increase your rate a
affordability. So, if you’re 65 and not
why valuations are so important at the
little bit extra than the advertised
working with no income, we’re not
high end. Banks don’t necessarily lend
interest rate?
going to be able to get a loan.
80% of a $10,000,000 property.
