Clients: Lynette Mary Bowen
DL No.: 417390; DOB: 16/02/90
Gordon George Bowen
DL No.: 421810; DOB: 17/09/89
Best phone number: 0400 111 222
Current Address: 22 Elmslie Street, North Parramatta NSW 2151 Time at address 32 months (Rent $380 per week)
Previous Address: 33 Grant Street, Tweed Heads NSW 2485 Time at address 2 years
Children: Two children aged 6 and 8
Credit Cards: ANZ credit card - $6,000 limit (balance $3,200)
Other: Mr and Mrs Bowen each have $45,000 in superannuation
The clients are looking to purchase their first home which is a small, newly built 2 bedroom unit at 4/12 Garden Grove Bankstown NSW 2200, for $485,000. The property has never been occupied before.
They have funds of $55,000 of which $35,000 were genuinely saved. The remaining $20,000 was a redundancy payment to Mr Bowen from his previous employer.
Mr and Mrs Bowen are eligible to apply for the FHOG. They are aware there will be a body corporate fee in the new unit complex which they have been told is $75 per week per unit.
Mr Bowen works as a carpenter with a JJ Construction, a major construction company in Bankstown and has been there for 36 months. His salary is $72,000 p.a. plus he has earned an average of $500 per week in regular overtime over the previous 18 months. He previously worked for a Tweed Heads Carpentry company for 4 years before being made redundant when the business was bought out.
Mrs Bowen works as a Receptionist with the BB Real Estate company and earns $47,000 p.a. She has been there for 36 months. She previously worked for another Real Estate company in Tweed Heads for 4 years.
The clients own 2 cars – a 2010 Holden Ute worth $12,000 and a 2016 Nissan X-Trail 4x4 worth $20,000 with Nissan finance of $15,000 with repayments of $343 per month over 48 months.
.Although addresses show NSW, for the purpose of duty/cost calculations, assume that the clients live in the same state as you (the broker).
.You should assume a Standard Variable Rate of 5% and a Qualifying rate of 2.5% above the Standard Variable Rate (for your NSR form).
.Assume the clients will be “full-doc”.
.Assume this lender would accept 50% of overtime income and assume overtime forms part of the applicant’s total gross income
LVR and LMI: To work out the LVR you first have to decide how much money your client can afford to borrow.
- One method would be to determine if they could do a 95% loan so you would simply work out what 95% of the purchase price would be. The purchase price is $485,000 x 95% = $460,750 (loan amount) LVR 95%. The LMI is worked out on $460,750 and the clients pay the fees from their own funds or some lenders will allow them to capitalise it into their loan.
- Another method would be to work out the total funds available to the clients e.g. $55,000 savings plus FHOG. After working out costs and taking these away from their available cash you would then know how much is left for a deposit. Once you know how much deposit they have you would then know the loan size and from there work out the LVR. The LMI is worked out on the loan amount that you end up with. Don’t forget to add the LMI stamp duty.
Keep in mind that first home buyers tend to want to do things with their first house, such as carpets, furniture, fittings, etc. and if they have some funds left over after settlement, they wouldn’t need to rely so heavily on credit cards, etc.
Please note: The table called Living Allowances on the NSR sheet is based loosely on the Henderson Poverty Index and should be used in these assignments, as we are not using a real client. However, in real life ASIC has ruled that a budget must be completed for each client to assess living expenses (we provide a sample budget form at the back of Appendix B20 for interest).