A lender considers the loan against 7 hurdles:
3 the Borrower influences:
- Structure – how the loan is to be set up for the client
- Servicing – how much they can borrow in relation to income
- Security – how much deposit they have and what type of property are they buying
4 the Lender controls:
- Product – price, policy and procedure will vary according to product
- Price – the interest rate payable on the loan
- Policy – what the lender allows them and their clients to do
- Procedure – how the lender will do things
Structure
Does the borrower need a fixed rate, a split loan, to pay interest only repayments or perhaps principal & interest repayments?
Servicing
Can the client afford the repayments based on the Lender’s Assessment Rate (which is usually 1.5 to 2% above the market rate)?
Security
What type of property are the borrowers buying? Where is it? Is the purchase price a true reflection of the market?
Product
What type of loan does the lender offer? Is it what the client needs and/or fits their desired structure etc?
Price
What is the interest rate? What are the fees and charges ascertainable?
Policy
Do the Lender’s policies accept the borrowers’ situation and preferences?
Procedure
How will the loan be processed? Will it be done in time?
My business is to ensure that every client I see can cross all seven hurdles with the lenders I offer as options.
The hurdle I consider to be the highest priority is Structure as this is where I must understand the clients’ needs and goals. If I don’t listen to the borrowers here they will never become clients as I will have not met their needs.
This hurdle is not given high enough priority by the majority of Lenders and Brokers because you can get a deal set by just considering the other six, however your client will ultimately be lost because you haven’t verified that the product meets their needs or helps them achieve their goals. Ian Franklin
