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Why it is important to have access to many banks

Why it is important to have access to many banks


When experienced property investor Mark Baker agreed to buy a block of land, he didn’t expect the land’s mining-town location to make it difficult to secure finance. After failing to find a lender who could help him, he visited a finance broker who found just the right mortgage for his needs.

Mark Baker, an experienced property investor and engineer who works in mining, agreed to buy a block of land in a mining town with conditional approval for finance directly with a lender. However, when it came time to settle 18 months later, the pre-approval had expired and the lender had changed its policy for mortgages in mining towns, leaving Mark with a looming settlement date and no finance.

Mark applied directly to a wide range of other lenders, but kept facing the same problem. In a bind, he visited an MFAA Approved finance broker just 10 days before settlement.

“The rental return is crazy in the area, around 15 to 20 per cent. But the risk is higher,” Mark’s credit adviser says. “So most lenders have restrictions in mining towns and cap mortgages at a 60, 70 or 80 per cent loan-to-value ratio (LVR). No one was willing to finance 90 per cent of the property value, which is what he needed. By the time he came to me, he had a very ugly looking credit file and not many options left.”

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