Ikon Homes teams up with Squirrel Financial Services
What are the key things to consider when applying for a home loan?
Banks always consider three important factors when they are looking at a home loan application. The first one would be your deposit. Is it saved and can you demonstrate a regular pattern of savings? Alongside this, the bank will look at your Loan to Value Ratio, which is LVR. How we arrive at an LVR is looking at your purchase price. Say you buy something worth $100,000 and your deposit is $10,000, it means your loan amount is $90,000 so your LVR is 90%. The second one would be your Debt Servicing Ratio. Known as DSR. What that does, is measures the portion of income that is required to see what debt level you can service. The bank will look at your obligations, your outgoing expenses and your proposed mortgage to see whether or not you can actually service that new level of debt.
The last factor would be your capacity, also known as UMI, which is Uncommitted Monthly Income figure. Basically, what the bank looks at is your capacity. Your spending behaviour at the moment, to be able to service the new level of debt that you’re looking at obtaining.
How surprised are people when they come to you and find out all these other factors?
I think they are genuinely quite surprised. A lot of individuals then actually consider things like capacity when they are looking at buying a house. Normally, they just fall in love with a purchase that they found and then when I come back with saying, “Hey, you’re not actually quite in a position to buy something at the moment and it has to do with your capacity,” they are genuinely quite surprised.
What options do you have for those who currently rent or own a home, but are wanting to build a new home, but not wanting or in a position to service two mortgages, or rent and a mortgage?
At the end of last year, we created a new product, which is called Squirrel’s Home Build Offer. Essentially, how that works is, we build an additional funding into the loan for the client. This additional funding is called the interest buffer and it services the loan for the client throughout the build. The additional money that they are using, gets capitalised into the loan at the end. Their deposit is as small as 5%, which is great for first-time buyers.
What specific conditions or criteria is there to be approved for Squirrel’s Home Build Offer?
The key piece here is, the clients need to be permanent residents. No travel condition on their visa, or citizens. They have to demonstrate that they can service the loans, the capacity is a key one. The other thing is that we’ve got a select few builders that we are working with, with this product and Ikon Homes is one of them.
Once an advisor has got the client approved, what involvement does the advisor have once the build contract is signed?
With Squirrel in particular, we take them on quite heavily and we classify ourselves as project managers for our clients. Not only once the loan is approved but even throughout the build, we help our clients throughout that entire process and where we step in quite heavily is, we ask the builder to send the progress claim to us. We check for our clients to make sure that the invoices come from the builder, the account number is their builder’s account number. We make sure that the work that has been completed is up to standard with the progress payment and once we have done those checks, we get the authorisation from our client to make sure that that payment is paid from the bank to the builder. It saves the client having to run around thinking, “Where have I got to make this payment and to who?” We assist them through the entire process until the end.