Below is an excerpt from chapter 8 of N1’s published “Private Lending Handbook for Mortgage Brokers 2024”. If you wish to get a free copy, please reach out to us at your PD days or industry events.
It is worth noting that sophisticated mortgage brokers go beyond just adding value to clients; in fact, they add substantial value to lending partners, too. A diligent broker, who has the clients’ best interests in mind, structures a deal in a viable way and ensures the borrowing client knows the benefits and costs of a solution, how to maximise value, and avoid pitfalls with a well-established exit strategy, backed up by a contingency plan.
Exploring the financing needs of clients requires a mind that can ask elaborative questions, similar to our last week’s email on what to ask when refinancing a private lending deal. Here are a few examples:
1. Is the purpose of funding a viable track to an exit strategy?
2. If the exit strategy is to refinance, what would be the realistic term needed?
3. If the exit strategy is to liquidate an asset, did you consider a potential long settlement period? Especially common in site sales. Relatively straightforward if it’s a usual residential property.
4. Why did the deal come in such urgency? Was it declined by other lenders and why?
5. If there is already a valuation report instructed by another lender, why didn’t the lender proceed?
6. If it’s a purchase, what’s the net funding required? Did you consider the cost of purchase, such as stamp duty, etc?
7. Many purchasers may not be aware that commercial property purchase attracts GST that’s not to be funded.
8. Does the borrower’s asset and liability position enable a different way to approach funding? Such as cross-collateralising; crossing residential/commercial properties of different states at different LVR is something very common in private lending.
As a private lender we work with many broker partners. Mortgage brokers who’re constantly upgrading their business model are the ideal go-to community for commercial properties and prestige properties investors. With what we are seeing in Sydney, Melbourne, and Brisbane markets, median prices are redefining the price point of “prestige property”. What we see $4 million in the past could have meant $6 million in the current market, indicatively. Complex lending in the segment of more than $4 million loan size requires a different skill set that many sophisticated mortgage brokers can substantially add value!
