Reference no: EM133053306

Section 1:  Case study 1 - Philip and Jennifer Brown

Background

Philip and Jennifer Brown are a young couple about to buy their first home. They have been married for five years and during that time have rented an apartment while saving for their own home. 

Following a personal referral from Glenn Brown, Philip's brother you have already had a first meeting with Philip and Jennifer to discuss their objectives and needs. They admitted they have little time to do much research of lenders, have limited knowledge of the loan products available and have approached you to guide them through the process as they are confused.

During (and subsequent) to your first meeting, Philip and Jennifer have provided the basic information documents - pay slips, tax returns, bank statements, property details for review/verification. You have now undertaken your preliminary assessment and need to discuss and present to them the proposal covering the options and your recommendations. It is important to get the proposal moving quickly, as the agent has indicated other parties are interested in the property.

They have been looking at properties for the past three months and have found a 10 year old established apartment that has really caught their eye, although they have some concern over the kitchen which requires some minor renovations.

They have not paid a deposit at this stage, but the Real Estate Agent has provided some guidance on additional fees and charges.

Following is a summary of the details of the property they wish to purchase, the couple's financial and employment details, and the loan features they require.

The property

Address	Unit 1, 92 Seaside Lane Edgartown (Your state)
Purchase price	$490,000
Description	2 bedroom, 2 bathroom Strata Title apartment
Agent details	Stephanie Jones
Phone	8123 1113
Mobile	0412 880 088

The applicants

Current address	Unit 12, 22 Wentworth Lane, Highville, WA
Philip and Jennifer have lived there since March 2015
Home phone	9123 2121

Funds position

Purchase price	$490,000
Clients' estimate of costs	$25,000
Total required	$515,000
Loan	$440,000 + LMI
Clients' total contribution (including deposit of $50,000)	$75,000

Use fees and charges applicable to your state. If a servicing calculator you are using requires a postcode, select one that would represent a reasonable suburb/location in your city or state.

Assets

Capital Bank savings account (joint)	$78,000
Capital Bank cheque account (joint)	$1,600
Holden Colorado 2012 (Philip)	$25,000
Kia Cerato Sport 2015 (Jennifer)	$9,000
Superannuation - Capital Bank (Philip)	$28,000
Superannuation - Capital Bank (Jennifer)	$62,000
Household effects (insured value)	$40,000

Liabilities

Capital Bank personal loan (Philip)	$5,600 (repayments $180 p.m.)
Capital Bank Visa card (Philip)	$200 (limit $4,000)
Capital Bank Visa card (Jennifer)	$1,600 (limit $5,000)

Payments have always been met on time and any prior loans repaid in terms of contracts. The minimum monthly commitment on each of the credit cards should be calculated at 3% of the credit limit.

Living expenses

Annual expenditure for living expenses - $33,000.

Employment and income

Philip (date of birth 21/2/87)

Position	Team Leader (full time)
Employer	ACE Limited 101 City Rd, Westside (Your state)
Phone	9800 1111
Income (gross)	$58,000 p.a. monthly gross income: $4,833
Employer contact	Dwayne Johnson, HR Manager
Length of service	Since October 2005

Jennifer (date of birth 8/10/88)

Position	Accountant (full time)
Employer	Tech city 804 High Street, City East (Your state)
Phone	9910 2033
Income (gross)	$95,000 p.a. monthly gross income: $7,917
Employer contact	Bruce Wayne, HR Manager
Length of service	Since March 2006

Solicitor's details

Jones and Co

22 High Street, City East (Your state)

Phone: 82811382

Email: jonesandco.net.au

The solicitor has quoted a fee of $1,500 for the conveyance.

The loan requirements

• 30 year term
• premium option home loan features
• variable interest rate (for this case use 4.5% p.a.)
• LMI to be capitalised
• proposed settlement date - six weeks from exchange of contracts
• ability to make additional payments from time to time without penalty
• fortnightly repayment option
• redraw facility
• funds access via card.

Note:

1. The loan application fee is waived under a Special Offer.

2. Use Genworth for Lenders Mortgage Insurance - the Genworth LMI Calculator. For assignment purposes, please use the Upfront LMI premium generated by the calculator.

Other information

• They have advised that the Real Estate Agents have indicated they need to make a formal offer within the next 10 days, however they are reluctant to do so until they obtain an approval.
• Jennifer has asked if there are any professional package benefits available because she is an accountant. However, Jennifer has confirmed that she has not renewed her industry association membership.
• Jennifer previously owned and lived in an apartment with her two older sisters when they attended university, however they sold this property 12 months ago - minimal profit was made from the sale.
• Plans to start a family are five years away.
• They do have plans to take a major overseas trip prior to starting a family.
• Philip is hoping for a promotion within the next 12 months upon possible retirement of a long-term employee where he works.
• They have also expressed a concern about the possibility of interest rates increasing
• will need to complete the Genworth LMI Calculator and Genworth Serviceability Calculator to assess the security, debt service and borrowing capacity for Jennifer and Philip Brown. follow these steps:

(a) Use the details in Case study 1.