Venro were recently contacted by a young solicitor working for a top tier law firm.
The client was interested in a specific property that was an apartment in a suburb on the city fringe. She had a 10% deposit and funds to cover associated costs made up partly of genuine savings and parental gift to purchase her first property which she would live in. So, when she approached us she was hoping to borrow 90% of the purchase price.
She understood that legal professionals are offered a waiver of lenders mortgage insurance (LMI) in some cases up to 90% which would make the purchase possible.
How does LMI work?
LMI is a fee paid by the borrower which can total tens of thousands of dollars, it is added to the loan when the borrower has less than 20% deposit.
However, some banks have policies where they will waive this requirement for certain professions – primarily accounting, legal and medical professionals.
She had been referred by a colleague who had a poor experience with another broker on a similar transaction. The colleague was pre-approved with an LMI waiver and a signed contract in a high-density postcode. The broker then had advised they would have to pay LMI on the property, which Venro was able to resolve once engaged by finding the appropriate bank for the purchase!
The challenges we overcame
Some banks treat apartments in certain suburbs adversely and refer to them as high-density post codes, usually suburbs with a high density of apartments. They are seen as unattractive security to a bank, especially in a weak market, there can often be many listings of similar dwellings and values can drop when there is excess stock. The apartment was in a suburb many would consider a trendy, upmarket and a desirable suburb to live. Despite this we were aware that some banks may not wish to give the LMI waiver on this particular property.
To add to the complexity, we had time pressure from the agent and the seller to get the contract unconditional – the contract was signed late Monday with finance due on the Friday, leaving us with only four full business days to complete.
The process to obtain approval
We quickly worked through the banks with LMI waivers for solicitors to establish which would provide the waiver on this particular property. Of those with an LMI waiver only one would apply this policy on this particular apartment block and post code.
We then spoke to the assigned valuation firm to express the urgency; they escalated the job, and we received the valuation back in a timely manner.
Fortunately the bank was able to accelerate their assessment and provide unconditional approval by the finance date on the Friday.
Working closely with lenders and our client we were able to achieve:
- Funding from a bank that would approve an LMI waiver on the property under their legal industry solicitor policy, saving the client from paying an LMI premium of approx. $14,300 in this case.
- Ability to secure the property the client wanted in a very short time frame to meet the finance clause and take it off the market.
Speedy escalation of the details and working with all parties involved enabled us to meet the tight deadline of four business days for the finance, resulting in a great outcome for our client. This enabled the client to secure the apartment she had her heart set on.