australian mortgage banking finacial Calculations finding LMI and using glenworth calcualtor

Student number

Result — first submission (Details for each activity are shown in the table below)

Parts that must be resubmitted:

Result — resubmission (if applicable)

First submission

Resubmission (if required)

Section 1: Case study 1 — Clinton and Stephanie Clintons

Task 1 — Initial disclosures

Not yet demonstrated

Not yet demonstrated

Task 2 — Gathering and documenting client information

Not yet demonstrated

Not yet demonstrated

Task 3 — Assessing the clients’ situation

Not yet demonstrated

Not yet demonstrated

Task 4 — Using equity

Not yet demonstrated

Not yet demonstrated

Task 5 — Reasonable enquiries

Not yet demonstrated

Not yet demonstrated

Task 6 — Recommendations

Not yet demonstrated

Not yet demonstrated

Task 7 — Clinton and Stephanie’s professional network

Not yet demonstrated

Not yet demonstrated

Task 8 — Interest rates

Not yet demonstrated

Not yet demonstrated

Task 9 — Settlement

Not yet demonstrated

Not yet demonstrated

Section 2: Case study 2 — Tony and Lorraine Denton

Task 10 — Establishing level of financial knowledge

Not yet demonstrated

Not yet demonstrated

Task 11 — Responsible lending obligations

Not yet demonstrated

Not yet demonstrated

Task 12 — Self Employed special considerations

Not yet demonstrated

Not yet demonstrated

Task 13 — Advising on strategies

Not yet demonstrated

Not yet demonstrated

Task 14 — Impact of credit history

Not yet demonstrated

Not yet demonstrated

Task 15 — External dispute resolution

Not yet demonstrated

Not yet demonstrated

Task 16 — Effective access to files

Not yet demonstrated

Not yet demonstrated

Address:

29 Pacific Drive, Ipswich, Queensland 4305

Purchase price:

$450,000

Description:

4-bedroom brick veneer home

Rent:

$450.00 per week

Agent details:

Rain and Hall

Phone:

07 9322 1113

Mobile:

0412 880 088

Current address:

17 Moss Ave, East Hills, NSW 2213

Description:

5-bedroom full brick home

Value:

$850,000

Mortgage:

$190,000

Monthly repayment:

$1,020.00 per month

Home phone:

02 6051 2121

Purchase price:

$450,000

Estimated costs:

$20,000

Total required:

$470,000

Loan:

$405,000 + LMI

Own contribution:

$65,000

Big Bank offset savings account (joint)

$180,000

Little Bank fixed term account (joint)

$10,000

Ford Falcon G6, 8 years old (Clinton)

$15,000

Holden Barina, 10 years old (Stephanie)

$5,000

Superannuation — MPA Insurance (Clinton)

$82,000

Superannuation — CLM Insurance (Stephanie)

$54,000

Household effects (insured value)

$80,000

Big Bank standard home loan (Joint) (P&I repayment, variable, no fees)

5.0%

$190,000 (repayments $1,020 p.m.)

Big Bank Visa card (Clinton)

18.5%

$800 (limit $5,000) (clears monthly)

Little Bank Visa card (Stephanie)

12.9%

$1,200 (limit $3,000) (pays $500 per month)

Position:

Project Manager (full time)

Employer:

ACM Construction

10 Wide Rd, Ryde, NSW

Phone:

02 7061 2111

Income (gross):

$85,000 p.a., gross monthly income of $7,083, net monthly income of $5,476

Employer contact:

Kelly Williams, HR Manager

Length of service:

16 years

Driver’s licence:

8869KL

Email:

clinta@acm.com.au

Position:

Accounts Assistant (full time)

Employer:

Pretty Clothing Pty Ltd

80 High Street, Penrith, NSW

Phone:

02 9940 3677

Income (gross):

$74,000 p.a., gross monthly income of $6,166, net monthly income of $4,837

Employer contact:

Joan Collins, HR Manager

Length of service:

7 years

Driver’s licence:

2897HT

Email:

Jennya@pc.com.au

Answer here

Before collating information from the new clients, following three disclosures should be made:

· how intermediary is to be paid

· who the intermediary represents

· who the intermediary pays for referrals

The MFAA’s code of Practice requires that all the members to disclose the commissions regardless whether the commission is to be paid by borrower or the lender. Irrespective of membership of the MFAA and the need to comply with their Code of Practice, certain disclosures are mandatory for loans regulated by the NCC.

The Corporations Act prohibits secret commissions between agents and principals. Both the NNC and the Corporations Act include provisions that commissions must be disclosed in relations to commercial transactions.

The Consumer Credit Administration (Finance Broker) Regulations 2004(NSW) requires loan writers to, as well as disclosing monetary commissions, aslo disclose any interests, relationships and alternative forms of commissions that may influence their recommendation. It also includes soft dollar commissions such as, tickets to sporting event and holiday packages.

Payments by intermediaries to third parties (such as real estate agents, accountants, solicitors, valuers and other associates of the borrower) for referring potential clients are widespread in the mortgage industry. Both the CCLC and the steering committee advising the NSW government on credit reform have strongly recommended the inclusion of provisions requiring intermediaries to fully disclose any fees or commissions paid to third parties referring business

Answer here

For disclosure of commissions, the relevant documents are: (a) credit guide—given by credit assistance providers, credit providers and the credit representative of those licensees; (b) credit proposal disclosure document (proposal document)—given by credit assistance providers; and (c) pre-contractual disclosure statement—given by credit providers.

Assessor feedback:

Resubmission required?

No

Assessor feedback:

Resubmission required?

No

Assets and liabilities

Surplus/deficiency:

Needs analysis

Notes

Anticipated fees and charges

Loan interview diary

Name(s) of client(s) present at interview

Date of interview:

Location of interview

Indicate all clients who were interviewed in person

Do all of the clients appear to clearly understand English? YES

If not, have the services of an interpreter been recommended?

Do all of the clients clearly benefit from taking out this loan? YES

If not, what inquiries have been made to ascertain the level of benefit to each party of the loan?

Are any clients acting as though they are under duress or other disability? NO

Are any clients acting as though they are unsure of anything about the loan? NO

Are any of the clients acting as though they are unable to comprehend their obligations? NO

Are there any guarantors? NO

If yes is answered to any of the above questions, have the clients been advised to seek the services of a lawyer or financial adviser?

YES.

Solicitor’s details

Jones and Co 22 High Street, City East, 2997

Phone: 02 8281 1382 Fax: 02 8290 1800

Provide details of other pertinent information obtained during the loan interview which may be of interest or any unusual circumstances you may wish to record

Assessor feedback:

Resubmission required?

No

Answer here

Depending upon the information provided by client, the client can secure a loan with a number of lenders. They can borrow $600k - $750k (Where this figure came from?) depending on various assumptions made by the lenders. Rate of 5.68% (Incorrect interest rate used couple is qualified for 4.68% as per above information ?)is used to calculate the borrowing capacity. $2000 (Living expenses incorrect its $3200 as per above information ?) provision has been made of personal expenses per month expenses

Various quotes are as follows:

· $607000 with Bankwest

· $713000 with NAB Homeside

· $743000 with Commonwealth Bank

· Various lenders requires a 20% deposit plus the stamp duty and other incidentals. NAB homeside has a policy where it allows application with 5% deposit along with lenders mortgage insurance.

Answer here

In this case, Clinton and Stephanie is planning to deposit $60000 65K and the property price is $450000. Therefore, they need to get lender mortgage insurance due to the higher LVR (more than 80%). ? 87%According to Genworth online LMI calculator, it is estimated as $9842 $5792

Answer here

Depending upon the information provided by client, the client can secure a loan with a number of lenders. They can borrow $600k - $750k ( upto $ 1,000,035.00) depending on various assumptions made by the lenders. Rate of 5.68% is used to calculate 4.68% (eligible interest rate for couple ) the borrowing capacity.

$2000 $3200 provision has been made of personal expenses per month expenses

Answer here

Notes: Clinton and Stephanie is planning to deposit $60000 and the property price is $450000. Therefore, they need to get lender mortgage insurance due to the higher LVR (more than 80%). According to Genworth online LMI calculator, it is estimated as $9842 ?

Answer here

Potential risk for the client could be not budgeting their expenses and may fall behind payments. Also there may be a possibility of rate hike which can adversely affect client repayments. But Clinton and stephanie have summarised their expenses and can afford loan up to a further 200 bases point increase. ?

There are many inherent risks like drop in property prices, increase in rates and taxes, borrower being redundant which have been taken in consideration by the client before applying for loan.

Assessor feedback:

Resubmission required?

No

Answer here

To avoid the LMI they can use a family guarantor who has the ability of providing additional equity against their property and this may provide them with 100% ifthe new property’s value since the family member will offer 20% if the risk leaving the bank with the remaining 80%.

Their guarantor would ideally be the parent or grand parents as well as brother or sister, step relationships can be accepted as well. The family member must have sufficient equity and any source of income even retirement funds are acceptable.

Assessor feedback:

Resubmission required?

No

Answer here

They can use their first home as equity since lenders will allow the to refinance and gear their property to 90% ? with the mortgage insurance capitalized and base loan.

This is because the value of property has sky rocketed and this has increased their capital value. Thus, by tapping into this growth Stephanie and Clinton will be able to buy another property with full tax benefit by borrowing at 100% of the purchase price.

Assessor feedback:

Resubmission required?

No

Answer here

1. The reasonable inquires, such as the amount of credit required, time frame for repayment, the purpose and whether the desired product has appropriate features ad flexibility can be made to determine Clinton and Stephanie’s objectives.

2. Clinton and Stephanie have provided their employment details and history of residence. I will ask Clinton’s loan bank statement of his personal loan. This is to determine the likelihood that they will meet repayment obligations over the term of the loan.

3. I will consider clients main source of income including their salaries and interest income by checking their pay slips and tax returns to confirm that the clients have the capacity to repay the loan.

4. The borrower’s appreciation of the risks associated with the features of a particular credit product need to be noticed. I also will confirm with Clinton and Stephanie that the deposit to calculate LVR.

5. Valuations will be required for the property that the clients want to purchase. This will also be used by bank to assess their level of risk in proving loan to the clients.

6. Additional loan protection – Lender’s mortgage insurance will be required.

Assessor feedback:

Resubmission required?

No

Answer here

Written Proposal

Client’s needs

Clinton and Stephanie who have been married for five years are looking to buy their Second home. They have been looking at properties for the last month and found one which is cost $450000. The renovation of the kitchen and bathroom and other costs could be $20000 extra.

Clients are looking to take a variable interest loan with following requirements:

• 30-year term

• Premium Option home loan

• standard variable interest rate @ 5.68%

• proposed settlement date — 6 weeks time

• ability to make additional payments from time to time without penalty

· fortnightly repayment option

· redraw facility

· funds access via cardoffset facility

Current financial situation

Clinton and Stephanie are working in their jobs for more than 3 years and have $72000 ( in saving, out of which they want to use $60000 65K towards their home deposit and $12000 remaining in their saving account. Clinton, the husband, has a personal loan of $3600 ? and a Visa card with $2000 (5000)limit. Stephanie has a Visa card with $3000 limit.

Total Assets Total liabilities

Car $15000 Loan $190,000

Car $10000 ($5000) Credit card balance$2000 ($8000)

Superannuation $136000(Both)

Cash at bank $190000

Net Financial Position $159000 ?

As Clinton and Stephanie have no other liability, they can easily secure home loan to buy their second home. Assuming that Clinton estimated they spend around $2500 towards their living costs and insurances. After paying for mortgage and other costs, they will have $2560 left per month. ($4900 + $2900 - $2500(monthly expense) - $2740(monthly repayment) = $2560 ) They can save the money into offset account or to pay off the loan quickly. ? please explain where this comes from

As Clients are existing customers with Capital bank, I will suggest they apply for the 30-year term Premium option home loan with standard variable interest rate @5.68% with Capital bank . I believe capital bank will provide debit card attached to offset account. Capital bank allows application with less than 20% deposits along with LMI. Bank fees are also less than other banks. Capital bank has several branches throughout Australia and clients can access accounts via phone or online. Capital bank has several branches throughout Australia and clients can access accounts via phone or online.

If Clinton and Stephanie proceed with the loan, our organisation will get 1.2% (its max 0.71%) upfront fees and will also receive a trail. Disclosures will also include the external and internal dispute resolution process.

Assumptions

· Living costs and insurances are $2000 per month

· all information used related to Capital bank is based National Australia bank information

Proposal Disclosure Document

Client’s needs

Clinton and Stephanie who have been married for five years (15years) are looking to buy their second home. They have been looking at properties for the last 6 months and found one which is $450000. The renovation of the kitchen and bathroom and other costs could be $20000 extra. The other main costs are stamp duty $13940 and LMI $9842.

Clients are looking to take a variable interest loan with following requirements:

• 30-year term

• Premium Option home loan

• standard variable interest rate @ 5.68%

• proposed settlement date — 6 weeks time

• ability to make additional payments from time to time without penalty

• fortnightly repayment option

• redraw facility

• funds access via card

• offset facility

Current financial situation

Clinton and Stephanie are working in their jobs for more than 3 years and have $72000 in saving, out of which they want to use $60000 towards their home deposit and $12000 remaining in their saving account. Clinton, the husband, has a personal loan of $3600 and a Visa card with $2000 limit. Stephanie has a Visa card with $3000 limit.

Total Assets Total liabilities

Car $15000 Loan $190,000

Car $10000 Credit card balance $2000

Superannuation $136000(Both)

Cash at bank $190000

Net Financial Position $159000

Proposed finance

Lender/lessor: Capital Bank

Finance amount: $398,000

Interest rate: 5.68%

Term: 30 year

Repayments: $ 1365 fortnightly

Other features: 6 weeks settlement, ability to make additional payments from time to time without penalty, fortnightly repayment option, redraw facility, funds access via card, offset facility

Notes: Clinton and Stephanie is planning to deposit $60000 and the property price is $450000. Therefore, they need to get lender mortgage insurance due to the higher LVR (more than 80%). According to Genworth online LMI calculator, it is estimated as $9842.

If Clinton and Stephanie only contribute $60,000, they will not have sufficient money to settle the property with $370,000 loan.

The total estimated cost including Stamp duty and LMI is $457,353, less $60000 contribution is equal to $397,353.

The estimated loan amount is $398,000. Fortnightly repayment (principal & interest) of $1365 depending upon 5.68% interest on loan of $398,000 is quite convenient in current situation.

Assuming that Clinton estimated they spend around $2000 towards their living costs and insurances. After paying for mortgage and other costs, they will have $2842 left per month.

($4900 + $2900 - $2000(monthly expense) - $2958(monthly repayment) = $2842).

Fees payable by you to us

Nil

Reasonable estimate of commission

I will receive the commission from capital bank for assisting you to obtain finance.

0.4% of the amount of credit limit shortly after the finance is provided. We estimate this to be $1592.

0.15% per annum of your amount owing from time to time payable monthly. We estimate the largest monthly payment to be $4.44.

We may receive additional commissions from volume bonuses which are referred to in our credit guide. The amount of those additional commissions cannot be determined at the date of this document.

Estimate of total fees and charges payable to the financier in relation to applying for the finance

Establishment fee: $600

Valuation fee: $0

Total $600

These figures are estimates only and the final figures will be shown in your credit contract or lease. Some or all of these fees may be paid from the finance proceeds.

These fees are payable only once.

We are not aware of any other fees or charges payable to anyone else in relation to the application for finance, but the financier may impose some additional requirements.

Assessor feedback:

Resubmission required?

No

Answer here

The following home buyer assistance schemes and stamp duty concessions are available in NSW.

1. The second home - New Home scheme commenced from 1 January 2012 and provides eligible purchasers with exemptions from transfer duty on new homes valued up to $550,000 and concessions for new homes valued between $550,000 and $650,000.

Eligible purchaser buying a vacant block of residential land to build their home will pay no duty on vacant land valued up to $350,000, and will receive (NO Stam Duty) concessions for vacant land valued between $350,000 and $450, 000. (concession in stamp duty only)

These rates apply from 1 July 2012.

2. The seconf home Owner Grant (New Homes) scheme (the Scheme) was established to assist eligible second home owners to purchase a new home or build their home by offering a $15,000 grant.

The Scheme applies to new homes only and will reduce to $10,000 on 1 January 2016.

Clinton and Stephanie are not eligible for stamp duty concessions and the second home owner grant because they are buying an established home.

Assessor feedback:

Resubmission required?

No

Answer here

Other costs and charges

· Establishment fees

· Account keeping fees

· Late payment fees

· Guarantee fees(where applicable)

· Settlement fees

· Early repayment fees

· Solicitor fees

· Stamp duty (where applicable)

· Lender mortgage insurance (where applicable)

Assessor feedback:

Resubmission required?

No

Answer here

Some of the parties Clinton and Stephanie may wish to keep informed include

· The Real estate agent

· Real estate agents are among the most crucial people anyon interacts with when buying property, not unless a private vendor is involved. They mainly act as the sellers by communicating to the buyer about the features of the property as well as negotiate prices.

· The Insurance companies

· Since homes are high-value purchase that are long term any buyer ought to consider risk management iclusive of roperty insurance and mortgage. This will helps them to prevent incurring huge major financial losses if things do not go as planned.

· The Conveyancer

· The conveyancer is the individual that takes care of the legal aspects of purchasing property. They also offer legal advice. They mainglt prepare the necessary docunments that the ownership has been transferred meeting all legal requirements within the state.

Assessor feedback:

Resubmission required?

No

Answer here

1. Steps will be taken to verify the financial situation and serviceability of the borrower

2. Credit assistance providersa will make a preliminary assessment,

3. Credit providers will then make a final assessment so as to verify if the credit contract is suitable or not. This will be on the basis of the information obtained from the initial two steps.

4. A final and preliminary assessment to assess the suitability of the loan based on the information derived from the first two steps will be made.

5. A declaration as to the purpose of credit needs to be signed if the loan is to be used predominantly for business or investment purposes.

6. Preparation for settlement: Instructions for settlement are received from all related parties, such as borrowers, solicitors and conveyancers, and reviewed. All documents associated with the loan are thoroughtly hecked ensure that the information contained is correct, and that the documents have been correctly executed.

Supporting documentation such as contract and insurance polices should be provided and checked. Accounts are opened and periodic payment authirited are obtaindfo he payment of aon funds and acceptanece ofo loan repaymets, as necessary. Broker must make sure that client understands the terms and conditions and bank fees and charges and execute the document properly. Mortgage insurance is finalised as required.

7. Registration of security: The loan approval is checked for conditions relating to the taking of security. Staff from related organisation should attend the settlement. The securities are regstrered and stamped in accordnace with organisational policy and guidelines, and relevant legislation. All necessary actions taken with regard to security are confirmed and checked for completeness and accuracy.

8. Disbursement of funds: Authority to fraw down funds is received from approving personnel such as the relationship manger,credit manager or laons officer. Funds should be disbursed as per the instructions provided to the institutions. And client has to be informed when settlement is complete.

9. After settlement, the purchaser, or their solicitoe or conveyancer, must:

· Pay stamp duty to the relevant state giverment department or authoruty, if it has not already been paid.

· Lodge documents regardng the the change o ownership wth relevant state government department or authority.

10. Notify other parties, such as bodies corporate, owner’s corporations and utilities providers of the change if ownership

Assessor feedback:

Resubmission required?

No

Answer here

Brokers have to directly interact with the borrowers so as to identify their needs and analyse the data. Then draft a reasonable understanding of their requirements. The main inclusion being the purpose of the loan.

Additionally brokers usually act as liaisons between the lender and the buyer. In our case they will need to stay updated on throughout the process even if they are not playing a huge role in all processes since they need to match the buyers’ property goals to their finances and thus negotiate a loan product that will match their needs. They wil not only do the tiring legwork they will also ensure smooth loan processing since they will be able to guide the buyer throughout the entire process.

Assessor feedback:

Resubmission required?

No

Answer here

(a) RBA decides to either stimulate or ‘cool off’ economic activity

Every month except January, the RBA board meets to decide on the most appropriate monetary policy for Australia’s economic environment. The policy involves setting the cash rate, which is the interest rate banks charge each other on overnight loans.

(b)In Australia it is important for the RBA to set a target for the interest rate on overnight loans between financial institutions in the wholesale money market. This is done by the RBA then borrowing and lending overnight money on the wholesale markets to influence the supply and demand of overnight money, ensuring that the actual overnight interest rate remains as close as possible to its target rate. Moreover, home loan interest rates in the economy are influenced by this interest rate to varying degrees, so that the behaviours of borrowers and lenders in the financial markets are affected by the RBA’s monetary policy.

.

(c)Banks are not obliged to follow suit because the RBA does an estimate of the borrowing rates they think would be appropriate and what cash rate cuts would need to be to achieve that, taking into account the likely movements in funding costs for the major banks.

.

Assessor feedback:

Resubmission required?

No

Answer here

Advantages

The main advantage of a fixed rate home loan is certainty. Fixing their loan ensures that their repayments do not change for a set period of time.

During times of very low interest rates, fixing their loan can work to their own advantage, because they can retain a low rate for a fixed term even if the rates rise steeply  If the RBA were to decide to lift interest rates in the near future, they will retain a low and stable interest rate for their home loan.

Disadvantages The main disadvantage of a fixed rate loan is that they will not benefit from falling interest rates (should the Reserve Bank cut the cash rate again).

They are also usually fixed for a set term of, say, up to five years, so they will have to ride it out if decide they would prefer to switch to a variable rate or they would wish to sell their property or refinance their loan.

Assessor feedback:

Resubmission required?

No

Answer here

If they decide to break that contract by switching, your existing lender must be compensated for any loss they incur. Breaking a home loan during a fixed interest period can be expensive, which is why it's always worth getting a quote from your lender before breaking a fixed interest rate home loan.

If they are thinking about breaking a fixed home loan, their first step is to contact the lender and request a quote for breaking their loan inclusive of the early repayment cost. Then compare the interest costs of a potential new loan, this could be a variable or fixed rate loan option

Assessor feedback:

Resubmission required?

No

Answer here

1) A declaration as to the purpose of credit needs to be signed if the loan is to be used predominantly for business or investment purposes.

2) Preparation for settlement: Instructions for settlement are received from all related parties, such as borrowers, solicitors and conveyancers, and reviewed. All documents associated with the loan are thoroughtly hecked ensure that the information contained is correct, and that the documents have been correctly executed.

Supporting documentation such as contract and insurance polices should be provided and checked. Accounts are opened and periodic payment authirited are obtaindfo he payment of aon funds and acceptanece ofo loan repaymets, as necessary. Broker must make sure that client understands the terms and conditions and bank fees and charges and execute the document properly. Mortgage insurance is finalised as required.

3) Registration of security: The loan approval is checked for conditions relating to the taking of security. Staff from related organisation should attend the settlement. The securities are regstrered and stamped in accordnace with organisational policy and guidelines, and relevant legislation. All necessary actions taken with regard to security are confirmed and checked for completeness and accuracy.

4) Disbursement of funds: Authority to fraw down funds is received from approving personnel such as the relationship manger,credit manager or laons officer. Funds should be disbursed as per the instructions provided to the institutions. And client has to be informed when settlement is complete.

5) After settlement, the purchaser, or their solicitoe or conveyancer, must:

· Pay stamp duty to the relevant state giverment department or authoruty, if it has not already been paid.

· Lodge documents regardng the the change o ownership wth relevant state government department or authority.

· Notify other parties, such as bodies corporate, owner’s corporations and utilities providers of the change if ownership.

Assessor feedback:

Resubmission required?

No

23 Watkins Road, Central Park

$450,000

Popular Credit Union savings account (joint)

$1,200

Little Saving Building Society cheque account (joint)

$2,300

Business debtors (unpaid invoices for work)

$6,200

Ford Utility, 3 years old (work vehicle)

$25,000

Holden Commodore, 7 years old (family car)

$15,000

Superannuation — AMB Insurance (Tony)

$36,000

Superannuation — AMB Insurance (Lorraine)

$24,000

Household effects (insured value)

$60,000

Lender

Situation

Interest rate

Monthly repayment

Debt

Popular Credit Union (home loan — joint)

Currently up to date though had 3-month extension to contract after hardship application 9 months ago

5.7%

$1,567.00

$270,000

Big Bank Visa card (Tony)

Only able to repay 3% per month for last 6 months

18.95%

(pays 3% per month)

$230.00

$7,600

(limit $8,000)

Little Bank Visa card (Lorraine)

Only able to repay 3% per month for last 6 months

Is over limit by $800

21.5%

(pays 3% per month)

$90.00

$3,800

(limit $3,000)

Hardly Normal Furniture Store

Did not keep to interest free contract and paying debt by instalments

28.50%

$380.00

$3,600

Super Car Loan lease

3-year contract expiring next month and need $15,000 to pay residual

n/a

$850.00

$15,000

(residual)

Cleaning Contract Supplies

Purchase approx. $1,000 per month in supplies, they are behind 1 month

n/a

$1,000.00

$1,800

Total

$4,117.00

$301,800

Answer here

Effective communicators have excellent observation and listening skills.

· Verbal communication – I will use clear language suited to Natalie because she did not work and manage the household finance previously and may only have little financial knowledge. Asking simple open and closed ended questions in order to under stands clients need for credit, methods of repayment and if she can afford a credit.

· Non-verbal communication can aid brokers in understanding what the client really means as well as helping brokers to express themselves ad confirm what they are saying. In this case, I believe facial expressions and eye contact are very important. I can help to obtain Natalie’s reliability.

Active listening is used to obtain more information and to explore for the real need. I will show my interests, remain neutral and use questioning and summarising techniques to show that I understand and to confirm my understanding

Assessor feedback:

Resubmission required?

No

Answer here

While the NCCP does not define substantial hardship, there is a presumption that if the only way a consumer can afford to repay a loan is by selling their principal residence, then the consumer cannot afford the loan without substantial hardship unless the contrary is proved (ss. 131(3) & 133(3) NCCP). This should be especially useful in fringe lending scenarios such as where a short–term loan is secured over the consumer’s home and the consumer is inevitably forced to sell the home at the end of the term (equity stripping), but may also be useful in the case of other loans such as credit cards if the consumer can clearly only repay the principal debt by selling their home.

ASIC has also provided some guidance in relation to substantial hardship in Regulatory Guide 209. Credit providers are expected to have detailed policies and processes to assess whether a consumer will be able to repay a loan, including processes for calculating what funds a person needs to pay for basic living expenses, in order to determine at what level a consumer can make repayments. Such processes:

· Must have reference to the consumer’s situation as ascertained from reasonable enquiries;

· Must involve some process for enquiring about living expenses or estimating living expenses using a benchmarking tool such as, for example, the Henderson Poverty Index plus a margin, or the maximum level of benefits for a person or family in the consumer’s situation; and

· Should generally involve the consumer meeting the repayments from income rather than assets (with obvious exceptions such as reverse mortgages and bona fide bridging loans).

Assessor feedback:

Resubmission required?

No

Answer here

It will reduce their overall monthly repayments substantially, as they only had one mortgage payment to make.

Debt consolidation loans usually have a lower interest rate and tend to be spread over a longer period – so the weekly or monthly payments are smaller.

Debt consolidation can make budgeting easier because there’s only one loan to manage

Assessor feedback:

Resubmission required?

No

Answer here

Assessor feedback:

Resubmission required?

No

Answer here

$4,117.00-$2998=1,119

Assessor feedback:

Resubmission required?

No

Answer here

Unlike PAYG (employed borrowers) who require to provide relatively simple documentation that is payslips and the latest group certificates, self employed individuals are required to provide audited tax returns and company financials for the last 2 years, some may require returns for the last one year. This will enable the lendor to assess the flow of income and how it affects the business so as to understand their financial position. Not only that they are will also be required to provide solepropretorship, partnership trust ir company returns and tax assessment notices.

Assessor feedback:

Resubmission required?

No

Answer here

low doc loans, they are required to provide supporting documents to verify the income that they have declared to the lender.

Each lender has their own requirements and will accept different document types to prove income.

The main documents that can be used to verify their income are:

· 12 months’ BAS statements showing a high turnover. lenders like to minimize their risks, and to see that you’ve got skin in the game.

· An accountant’s letter verifying your income. Large bank and investment accounts might serve as “reserves” you can dip into to keep making payments.

· Business bank statements showing a high turnover. Lenders are only willing to settle for less information if ythe borrowers have good credit scores (above 720 is a good place to start)

· Previous tax returns (over 24 months) income always helps them get approved for a loan

· Interim financial statement if everything else is in good shape, a few dings on their credit reports might not ruin the deal.

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No

Answer here

Low-doc loans are an alternative for the self-employed and small-business people who, without payslips or recent tax returns, can't readily verify their sometimes "lumpy" income for a standard home loan.

Instead, they're able to secure loans with a bigger deposit or by signing a statement simply declaring they can afford the repayments.

Low-doc borrowers usually have to come up with upto 30-40% per cent deposit depending on the lenders you are eligible with , where other lenders might need just 10 per cent.

However, consumer groups say low-doc loans have been used by "predatory" mortgage brokers to defraude borrowers in the market. They give under people loans who have little hope of servicing them in the knowledge that ultimately they can force the sale of the property and take the money.

This is because some lenders do not follow responsible lending rules that require them to determine if a loan is is suitable or not suitable

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No

Answer here

Find a cheaper interest rate

Shop around to find a home loan that offers a lower interest rate than the current loan. A loan that offers a honeymoon or introductory rate can be good but you need to check that it is right for them. The savings tend to be short-lived and once the honeymoon period ends, you could end up with a more expensive loan.

Make larger or more regular payments on their loan

Unless they have an interest-only loan, they will have to pay both principal and interest on a home loan. On a typical 30-year mortgage, anything extra you pay in the first 5 to 8 years (when most of your payments go towards paying off the interest) will cut your interest bill and shorten the life of your loan.

Pay off their credit card

They should try to pay off the entire amount owing on your credit card each month (or as much as possible). This will let them take advantage of any interest-free period.

If they only make the minimum payment each month, they will pay more interest and it will take them longer to pay off your balance.Their monthly statement must give you information about how long it will take to pay off the entire balance by making minimum repayments.

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Resubmission required?

No

Answer here

At present, there are three main credit reporting agencies operating in the Australian market. These are—in order of market share—Equifax previously known as VEDA Advantage, Dun and Bradstreet and the Tasmanian Collection Service.

The major consumer credit reporting agency is Equifax previously known as VEDA Advantage , which states that it maintains credit worthiness related data on more than 11 million individuals in Australia and New Zealand.

It has over 5,000 subscribers from a wide range of industries, including banking, finance telecommunications, retail, utilities, trade credit, government, credit unions and mortgage lenders.

Equifax previously known as VEDA Advantage’s Australian credit reporting business commenced in 1968 as the Credit Reference Association of Australia (CRAA), which was established by the finance industry.

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No

Answer here

To get a copy of his credit report he is required to contact a credit reporting body (CRB). He will be asked to provide personal information to enable them to properly identifyhim. This could includesr:

· Applicant full name

· Applicant current address

· Applicant date of birth

· Applicant previous address

· Applicant driver's licence number.

He can get a copy of his credit report for free from a CRB in all of the following circumstances:

· if he has applied for, and been refused credit, within the past 90 days

· where his request for access relates to a decision by a CRB or a credit provider to correct information included in your credit report,

· He also has a right to acces it once a year (not counting the above circumstances).

Credit reports are required to be provided within 10 days of the receipt of his request, however, if he wants his report immediately there may be a charge involved. He can check with the CRB about any charges involved in getting his credit report immediately.

A credit reporting body (CRB) must give him a copy of his credit report within 10 days of receipt of your request.

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No

Answer here

· Contact the credit provider and/or credit reporting body first and ask them to investigate and correct the specific inaccuracy. Tell them why I believe the information is incorrect – if I am unsure, ask them to explain why the information is on your report. Consumer safeguards in Australia require credit providers and credit reporting bodies to look into and respond to my correction requests.

· If I have documents that may be relevant in showing the information on your credit report is incorrect, it may be beneficial to provide this early on in your dealings with your credit provider or credit reporting body.

· If I think to needs hand with his correction request, I can make an appointment with a community legal centre who can help us with the process.

· If neither the credit reporting body nor the credit provider can correct the listing, I can contact an independent dispute resolution scheme called an Ombudsman service. Examples of these services include the Financial Ombudsman Service (FOS), the Credit and Investments Ombudsman Ltd (CIO), or the Telecommunications Industry Ombudsman (TIO).

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· They are obliged to discloses the inquiries about the client’s financial situation that made them decline.

· They are obliged to indicate how they verified the information about the client’s financial situation

· They should show how the assessment was made to find that the margin loan was not unsuitable by providing documents that record and reflect:

· The are obliged to decline an application due to multiple credit applications in a short space of time

· They are obliged to point out a a mistake on your application form that led to the declination.

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Resubmission required?

No

Answer here

Fix errors: if there are errors in his credit report, fix them. He shouldn’t be held responsible for computer errors or somebody else’s actions. He has the right to have mistakes removed. With big purchases like a home purchase, he can get errors fixed and

he can get his credit score updated within a few days using rapid rescoring.

Down payment: a larger down payment might help him get approved.  He’ll end up borrowing less, which means his monthly payments will be lower.

Pay off other debts: His other loans could be part of the problem. Again, lenders look at how much they spend on debt repayment, so reducing that expense will make him look better as a borrower.

Use collateral: if jhe is applying for a personal or business loan, collateral might help him get approved

Get a cosigner: if his income and/or credit were not sufficient to get approved, he might have better odds if he can add somebody else’s income and credit to the application (assuming they have good credit and decent income.

·

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No

Answer here

The Credit and Investments Ombudsman (CIO), previously known as Credit Ombudsman Service Limited (COSL), has been approved by the Office of the Australian Information Commissioner (OAIC) to handle privacy and credit reporting complaints under the Privacy Act 1988. All credit providers are required to be a member of an EDR scheme recognised by the OAIC before they are permitted to disclose credit information to a credit reporting body or access such information. If a person is dissatisfied with the decision of a credit reporting body or a credit provider about their complaint, or about the outcome of an access or correction request, they can complain to CIO about this as long as the credit reporting body or credit provider is a member of CIO.

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Resubmission required?

No

Answer here

CIO announces that the monetary compensation limit (MCL) applying to each claim for complaints received from 1 January 2015 will be $309,000. 

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No

Answer here

A public notary is a public officer, usually a practising solicitor or attorney, who is authorised to witness documents, and administer oaths.

They can perform other wide-ranging administrative tasks for both international and national purposes and are available in most countries.

A public notary can be accepted instead of a JP in some cases. You’ll need to contact your lender to confirm their policy concerning public notaries overseas.

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Resubmission required?

No