Malcolm and Susan Johnson 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 also saving for their own home.
They have been looking at properties for the last month and one has really caught their eye, although the bathroom and ensuite could do with a little work. They had planned on shopping around the various lenders themselves to find the most appropriate loan for their needs, but as they both work, they have little time to do the research necessary. And, as they both admit, they have limited knowledge of the loan products available and might have difficulty in evaluating the options.
They have not paid a deposit at this stage.
On a suggestion from Susan’s brother (one of your former clients) they have contacted you about the loan.
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.
The property
Address: Unit 12, 43 Seaside Parade, Coastville, <Your State>
Purchase price: $490,000
Description: 2 bedroom strata title unit
Agent details: Steven Allstone
Phone: 8282 1113
Mobile: 0412 880 088
The couple
Current address: Unit 12, 22 Wentworth Lane, Highville, <Your State>
Malcolm and Susan have lived there 5 years
Home phone: 9001 2121
Funds position
Purchase price: $490,000
Estimated costs: $20,000
Total required: $510,000
Loan: $430,000
Own contribution: $80,000
Assets
Capital Bank savings account (joint) $92,000
Capital Bank cheque account (joint) $1,600
Holden Commodore SS, eight years old (Malcolm) $25,000
Suzuki Baleno, seven years old (Susane) $9,000
Superannuation — Capital Bank (Malcolm) $28,000
Superannuation — Capital Bank (Susan) $62,000
Household effects (insured value) $40,000
Liabilities
Capital Bank personal loan (Malcolm) $3,600
(repayments $180 p.m.)
Capital Bank Visa card (Malcolm) $200
(limit $2,000)
Capital Bank Visa card (Susan) $600
(limit $3,000)
All debts have been repaid according to arrangements. In relation to the credit card debt, the minimum monthly commitment should be calculated at 3% of the credit limit.
Income/employment
Malcolm (date of birth 21/2/86)
Position: Team leader (full time)
Employer: ACME Limited
101 City Rd, Westside, <Your State>
Phone: 9800 1111
Income (gross): $55,000 p.a., net monthly income: $3,705
Employer contact: Alison Johnson, HR Manager
Length of service: 10 years
Driver’s licence: 8855KL
Email: malcolmj@acme.com.au
Susan (date of birth 8/10/87)
Position: Accountant (full time)
Employer: Phones R Us
804 High Street, City East, <Your State>
Phone: 9910 2033
Income (gross): $91,000 p.a., net monthly income: $5,629
Employer contact: Stan Adams, HR Manager
Length of service: 12 years
Driver’s licence: 17016C
Email: sjohnson@phonesrus.com.au
Interest income
Approximately $40 per month from $12,000, remaining in savings account after home loan deposit. Interest 4% p.a.
Solicitor’s details
Jones and Co
22 High Street, City East, <Your State>
Phone: 8281 1382
Fax: 8290 1800
The loan requirements
• 30-year term
• Premium Option home loan
• standard variable interest rate @ 5.57%
• 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.
Identify and describe three (3) of these disclosures.The National Consumer Credit Protection Act 2009 imposes ‘responsible lending’ obligations on brokers that must be satisfied by all people arranging loan applications. The primary objective under responsible lending guidelines is that the credit facility is ‘not unsuitable’ for the borrower.
Identify and describe the key factors that must be taken into consideration when assessing whether a credit facility is ‘not unsuitable’ for a borrower.
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