Case study 1 — Philip and Jennifer Brown
Philip and Jennifer Brown are a young couple about to buy their first home. They have been married for five years and during that time have rented an apartment while saving for their own home.
Prior to moving in with Philip, Jennifer lived in a property she purchased with her sisters. They sold the property once they all finished university, albeit they did not make much profit from the sale.
Following a personal referral from Glenn Brown (Philip’s brother) you have already had a brief initial phone call with Jennifer to arrange a meeting. Jennifer advised they have little time to do much research of lenders, have limited knowledge of the loan products available and have approached you to guide them through the process as they are confused about the whole process.
They have been looking at properties for the past three months and have found a 10-year-old established apartment that has really caught their eye, although they have some concern over the kitchen which requires some minor renovations. It is important to get the proposal moving quickly, as the agent has indicated other parties are interested in the property.
They have not paid a deposit at this stage, but the real estate agent has provided some guidance on additional fees and charges.
Following is a summary of the details of the property they wish to purchase, the couple’s financial and employment details, and the loan features they require.
|Address||Unit 1, 92 Golf Links Way, Bundoora VIC 3083 Certificate of Title Volume 10120 Folio 456|
|Description||2-bedroom, 2-bathroom strata title apartment, kitchen/family, lounge, 2 Car garage, golf course views.|
|Agent details||Stephanie Jones|
|Phone||(03) 9123 1113|
|Mobile||0412 880 088|
|Current address||Unit 12, 22 Wentworth Lane, Thomastown VIC 3074|
|Philip and Jennifer have both lived there for five years|
|Home phone||0419 123 456|
|Clients’ estimate of costs||$25,000|
|Total required for the purchase||$515,000|
|Loan amount||$440,000 + LMI|
|Clients’ maximum contribution (including deposit of $50,000)||$77,000|
Use fees and charges applicable to the state of Victoria. If a servicing calculator you are using requires a postcode, input 3083.
|Capital Bank savings account (joint)||$82,000|
|Capital Bank transaction account (joint)||$1,600|
|Holden Colorado 2012 (Philip)||$25,000|
|Kia Cerato Sport 2015 (Jennifer)||$9,000|
|Superannuation — Capital Bank (Philip)||$28,000|
|Superannuation — Capital Bank (Jennifer)||$62,000|
|Household effects (insured value)||$40,000|
|Capital Bank personal loan (Philip)||$5,600 (repayments $180 p.m.)|
|Capital Bank Visa card (Philip)||$200 (limit $4,000)|
|Capital Bank Visa card (Jennifer)||$1,600 (limit $5,000)|
Payments have always been met on time and any prior loans repaid in terms of contracts. The minimum monthly commitment on each of the credit cards should be calculated at 3% of the credit limit.
Annual expenditure for living expenses — $35,000.
Employment and income
Philip (age 32)
|Position||Team Leader (full time)|
|Employer||ACE Limited, 101 City Road Westside, Melbourne VIC 3000|
|Phone||0419 123 456|
|Income (gross)||$58,000 p.a., monthly gross income: $4,833|
|Employer contact||Priya Kumar, HR Manager|
|Length of service||12 years|
Jennifer (age 31)
|Position||Compliance Manager (Full time)|
|Employer||Tech City, 804 High Street, Docklands VIC 3008|
|Phone||0412 987 654|
|Income (gross)||$95,000 p.a., monthly gross income: $7,917|
|Employer contact||Dominic Mancini, HR Manager|
|Length of service||11 years|
Jones and Co
22 High Street, City East Melbourne VIC 3002 Phone: (03) 8281 1382
The solicitor has quoted a fee of $1,500 for the conveyance.
The loan requirements
- 30-year term
- premium option home loan features
- variable interest rate (for this case use 4.0% p.a.)
- LMI premium to be capitalised onto the loan
- proposed settlement date — six weeks from exchange of contracts
- ability to make additional payments from time to time without penalty
- redraw and offset facility
- certainty of repayments in case interest rates rise
- fortnightly repayment option
- funds access via card.
Note: Loan application fee is waived under Special Offer.
- They have advised that the real estate agent has indicated they need to make a formal offer within the next 10 days, however they are reluctant to do so until they obtain an approval.
- Family plans are five years away.
- They are planning to go overseas before they start a family.
- Philip is hoping for a promotion within the next 12 months upon possible retirement of a long-term employee where he works.
- They have also expressed a concern about the possibility of interest rates increasing.
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