Sometimes a second opinion can completely change the conversation.

In this case, a couple had been working with another broker and had been given an early indication that their borrowing capacity could be somewhere around $1.3 million to $1.6 million.

They had started planning around those figures and had even sold an investment property to improve their position.

Then, shortly before an auction, once the position was looked at in more detail, they were told their borrowing capacity was closer to $970,000.

That was a significant change and put their plans into question. Rather than assume the purchase was no longer possible, they came to us for a second opinion.

What Were They Trying to Achieve?

One client was self-employed and the other was salaried. They also had existing property debt, including a property they wanted to retain as an investment.

Their goal was to purchase their next home for around $1.3 million while keeping that existing property if possible.

The proposed purchase also included a guarantor structure to help ensure the purchase costs were covered.

Selling the existing property would have improved the servicing position, but it was not what they wanted to do unless it became necessary.

We Went Back Through the Full Position

Rather than starting with the previous borrowing figure, we went back through the entire scenario.

That meant properly reviewing the self-employed income, salaried income, existing loans, rental income, HELP debt, guarantor structure and proposed purchase.

One of the key issues was the self-employed income.

The latest financial year produced a stronger result, but before relying on that income we needed to be comfortable that the lender would actually adopt it for servicing.

So before submitting an application, we discussed the scenario with the lender and worked through how they would assess the latest year’s financials.

That was important. There is little value in producing a servicing result based on an income figure if the lender is ultimately going to assess it differently once the application reaches credit.

Only once we were comfortable with the lender’s position did we move forward.

A Verbal Indication Is Not the Same as a Proper Assessment

This was probably the biggest takeaway from the scenario.

There is a big difference between being given an early indication of what you may be able to borrow and having the full position properly assessed against lender policy.

A verbal borrowing figure can be useful as a starting point, but I would not want a client making major property decisions around it without doing the work behind the number.

For these clients, there were several moving parts. The self-employed income needed to be assessed correctly, the existing property and rental income needed to be included, the HELP debt had an impact and the guarantor structure formed part of the overall transaction.

Even after a servicing calculator produces a result, that does not necessarily mean the work is finished. The lender still needs to understand the overall position and be comfortable approving the loan.

That is why, particularly with more complex scenarios, I would rather complete the detailed review and, where appropriate, seek pre-approval before a client starts bidding at auction or committing to a purchase.

The $970,000 Figure Wasn’t the Only Outcome

Once we worked through the servicing across a number of lenders, the position looked different.

There were lenders where borrowing in the $1.2 million to $1.3 million range appeared achievable, subject to verification, lender assessment and the final structure.

That brought the clients much closer to the purchase they were actually trying to make.

The guarantor arrangement also helped ensure the purchase costs could be covered, while retaining the existing property remained possible.

But identifying a lender where the calculator worked was only part of the job.

Getting the Application Through Credit

The application still needed a detailed credit assessment.

We spent 92 minutes on the phone with the lender’s credit team working through the clients’ position before ultimately securing approval.

That discussion went well beyond simply confirming an income figure.

We worked through the clients’ existing assets and liabilities, the property they were retaining, their overall financial position, how the self-employed business had been performing and the reasons behind the growth shown in the latest financial year.

For the lender, the question was not simply whether the servicing calculator produced a pass. Credit needed to be comfortable that the income being relied upon was reasonable and sustainable and that the clients’ overall position supported the proposed lending.

That meant explaining the business properly and giving credit enough context to understand why the latest year was an appropriate reflection of the current position.

This is an important part of more complex lending that clients do not always see. Sometimes getting an approval is not about finding a policy and submitting an application. It is about understanding the policy, discussing the scenario with the lender before submission and then being able to properly support the application when it reaches credit.

Even Smaller Liabilities Can Affect the Result

We also looked at their HELP debt.

The balance itself was not particularly large in the context of their overall position, but the repayment obligation was still affecting the lender’s servicing calculation.

That did not mean it automatically had to be repaid. The important part was running the numbers first to see whether clearing it made a meaningful difference.

There is little value in using a substantial amount of cash to repay a debt if it barely changes the borrowing outcome. In this case, it was one of the factors worth considering as part of the wider position.

Keeping the Existing Property Was Part of the Goal

The clients could have sold the existing property and made the servicing easier, but that would have meant changing what they were ultimately trying to achieve.

So we assessed the position on the basis that the property would be retained and treated as an investment.

That meant properly allowing for the existing debt and rental income and identifying a lender whose policy worked with the overall position.

For me, this is an important part of the process. The lender and structure should support the client’s broader objective where possible, rather than simply producing an approval that requires them to sell an asset they wanted to keep.

A Second Opinion Is Not About Finding a Loophole

A second opinion is not about finding a lender that will ignore existing debts or somehow make the numbers disappear. The income still needs to be verified, the liabilities still need to be included and the lender still needs to be comfortable with the overall position.

What can change is the way different lenders assess those things, and how well the application is understood and presented.

That can be particularly relevant for self-employed borrowers, investors and clients with multiple properties, where lender policy and the credit assessment can have a meaningful impact on the result.

The Outcome

The clients were able to proceed with a purchase around $1.3 million, using a guarantor structure to help cover the purchase costs while retaining their existing property.

The application ultimately received approval with a mainstream lender and proceeded to settlement.

The result did not come from somehow creating extra income or finding a way around the lender’s requirements. It came from going back through the position properly, identifying a lender whose policy suited the scenario, confirming the treatment of the latest self-employed income before submission and then working through the application in detail with credit.

That is quite different to simply running a borrowing calculator and providing a number.

When Is It Worth Getting a Second Opinion?

If your borrowing capacity comes back much lower than expected, particularly if you are self-employed, have investment debt or own multiple properties, it can be worth having the position reviewed before making a major change to your plans.

Sometimes the original answer will be right. In other cases, another lender may assess the position differently or a deeper review may uncover options that were not apparent from the initial assessment.

The important thing is getting that clarity before you sell a property, pull out of an auction or assume the purchase is no longer possible.

If you have been given a borrowing figure that does not seem to line up with your position, get in touch and we can take another look at the numbers.