Using the information contained in the Scenario below, please complete the following 6 tasks. You must complete each task in order for your submission to be assessed. Omission of any one of these 6 tasks will be regarded as Not Yet Competent and you will then be required to resubmit this assessment in full.
- Recommend a product for the clients and explain your reasons for recommendation 2. List the supporting documents that would be needed to support the loan 3. Complete a loan costing sheet *
- Complete a loan servicing calculation (NSR) *
- Download and complete the FHOG application form that is relevant to your state/ter ritory, from the internet (or print from Appendix 15)
- Complete a loan application form (a blank NAB loan application form has been pro vided for you which you should use) and complete all of the accompanying documents as provided for you. .
The clients are looking to purchase their first home which is a small, newly built 2 bedroom unit at 4/12 Shelly Road, Auburn NSW 2144, for $595,000. The property has never been occupied before.
They have funds of $63,000 all of which were genuinely saved.
Mr and Mrs Hemingway 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 $125 per week per unit.
Mr Hemingway works as a site supervisor with Peabody Contractors, a major demolitions company in Parra matta and has been there for 36 months. His salary is $80,000 p.a. plus he has earned an average of $400 per week in regular overtime over the previous 18 months. He previously worked for a Lismore renovations company for 4 years before being made redundant when the business was bought out.
Mrs Hemingway works as a medical receptionist for Parramatta Eye Surgery and earns $62,000 p.a. She has been there for 36 months. She previously worked for another medical practice in Lismore for 4 years.
The clients own 2 cars – a 2010 Kia Cerato worth $12,000 and a 2021 Ford Ranger 4×4 worth $20,000 with Ford Finance of $18,000 with repayments of $431 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). For S.A.-based students assume the FHOG cap is $595,000.
- You must assume a Standard Variable Rate of 3% applies to this loan application and a Qualifying/Servicing rate of 3% is added to the Standard Variable Rate (for your NSR form).
- Assume the clients will be “full-doc”, that you suggested 3 lender’s products from which the clients decided on NAB
- Assume this lender would accept 80% 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.
1. 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 $595,000 x 95% = $565,250 (loan amount) LVR 95%. Here, the LMI would be calculated on $565,250 and the clients pay the fees from their own funds.
2. Another method would be to work out the total funds available to the clients e.g. $63,000 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 would not need to rely so heavily on credit cards, etc.
3. The clients have mentioned that, if there is a shortfall in the funds required to complete the transac tion, Larry’s parents have said that they would like to gift the couple $25,000 to complete the purchase. The parents are prepared to confirm in writing that the money is a non-repayable, unconditional gift.
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. 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).
1. Recommend a product for the clients and explain your reasons for the recom mendation. The lender has been agreed upon and we have provided that lender’s application form for your use.
2. List the supporting documents that would be needed to support the loan ap plication. Even though there may be a checklist in the lender’s application form, you must list the documents separately below.
3. Complete the loan costing sheet below
4. Complete a loan servicing calculation (NSR) by completing the form overleaf.
- You should calculate your loan repayments based on the qualifying rate that we have provided, Principal and Interest over 30 years. This loan repayment figure must be correctly calculated.
- Your NSR final result should not be over 85%.
- The total Living Expenses you detail in the lender’s application form should match the Living Expenses total you use in the NSR form overleaf.
5. Complete a loan application form [a blank NAB loan application form has been provided for you which you should use] and complete all of the accompanying documents as provided for you. Your answer to this Activity should be pre pared as if you were submitting a real loan application to the lender.
6. FHOG – Your client is eligible for the FHOG. Log into the website of the Office of State Revenue in your own state and download the application for a First Home Owner Grant. Complete this application form and include with your Assignment submission. Any information within the FHOG form that you are unsure of can be improvised. Remember to read the FHOG questions carefully when it comes to signing or initialing. Some state-specific interactive FHOG forms can also be accessed from Appendix 15 (specific to your own state/territory). S.A. students must assume the FHOG cap is $595,000.
Please note: If there is information required on the application that is not supplied then please improvise. The application should be completed as neatly as possible to ensure ease of review. Tax charts, an LMI table and sundry forms can be found in your course content. You do not need to create any “dummy” supporting documents (eg. documents that your client would typically provide to you in a real submission, eg. rates notices), just ensure you list them where required.
For this question you must include the following 5 completed forms (all have been provided for you:
- Lending Checklist
- Credit Guide / Disclosure
- Privacy Statement and Consent
- Loan Application Cover Sheet
- NAB Application form