I was recently approached by an accountant who was doing the tax returns for a new client. The client wanted a home loan to purchase a new house in the Hunter Valley. But, they were aware that they had received a credit history default since they had bought their Wollongong home. Lending policies have changed recently but a default is not something that too many lenders will accept when applying for a home loan.
The default came about because they had received advice from a solicitor. The advise was to cease making the repayments on the loan they had for a series of forestry investments they had made. This advice was based on the premise that the class action they were part of would be successful. The outcome they hoped for was that debt would be wiped. Also, that the credit history default would be cleared. In order to arrange the new loan, I approached the clients current lender and was predictably told that they weren’t interested. As such I needed to find a new lender who would approve both loans at one time (they wanted to keep the first house).
The task then became finding a lender who would approve a home loan for these clients, without charging them ridiculous interest rates because of the default. I spoke to several lenders to see how they currently treated such situations and didn’t get any positive responses. I then spoke to one of the lenders on my panel with a proposition for refinancing the Wollongong home loan and for granting a new home loan for the Hunter valley house. This deal didn’t require the credit history default to be paid before the loan was approved and settled. The proposal was warmly received and I was invited to lodge the application for the clients. I received a very good response to the application and it was approved without any changes to the original submission.
The clients have now settled the purchase of their new home, refinanced the original loan and and are very happy with the outcome. We even managed to get an extra interest rate discount of 0.22 percent greater than what the bank was offering customers who went direct to them.
This situation had a good outcome, but there are many people who have Willmott Forestry or Great Southern Timber investments that have stopped making the payments on their loans (resulting in a credit history default) and who now have a lot of trouble arranging a new home loan.
There maybe ways to help some of these people, but not everybody is in a situation that can be helped like the people in this example and a credit history default is a big hurdle to overcome. If you would like to discuss with me, please contact me.