In the current low interest rate environment many first home buyers are looking to get onto the property ladder. How can you bring them through your door and service their needs, and what are the benefits of targeting this market? MPA asked Will Foster Director of Foster Finance Sydney for his views
In the current low interest rate environment many first home buyers are looking to get onto the property ladder. How can you bring them through your door and service their needs, and what are the benefits of targeting this market? MPA asked Will Foster Director of Foster Finance Sydney for his views
How do you go about bringing in first home buyer clients?
It’s all by referrals. I don’t do any marketing myself, but I find that first home buyers are very good referrers because they’re very excited about their purchase and talk about it a lot.
What first home buyer trends are you seeing?
Because there’s not stamp duty relief and no cash grant [for existing properties], a lot of the time we’re seeing guarantee-type loans. In this area we’ve typically got high incomes for first home buyers – they might be earning $140,000-plus each – but not enough savings to get across the line to buy a place without mortgage insurance for $700,000 or $750,000. They’re happy to pay mortgage insurance, but it is an impediment for them. Is it hard work to get guaranteed loans over the line?
It’s just another process that has to go alongside the loan application. But it’s just really important when you’re doing it to make sure that the parents know everything that there is to know about the loan and that they know what their risk is. It’s important to be able to sit down with them or talk to them over the phone and explain to them exactly how a limited guarantee works, and to try and make them comfortable with the process as well.
Are there compliance boxes to tick here as well?
It’s always recommended, and I think the bank in most cases makes them sign off, that they have had independent legal and financial advice to do with the guarantee. It would be inappropriate for me to be providing that advice because I could be seen as having a vested interest. So they should always seek that [independent advice].
Do parents often come to you suggesting becoming guarantors?
No. On my template questionnaire there’s a question that says, “Do you have a friend or family member that can help out with the purchase?” And if they answer yes to that, then I’ll introduce the family guarantee structure in the interview.
Are there any common difficulties in closing the deal with first home buyers?
It really depends on the type of person. Some of them will be pre-approved five or six times over a two- or three-year period, and some will go out and buy within a week. So it varies. They’ve obviously decided to buy a property, so the main thing that I try and do is to make them confident in that decision and try and arm them with tools to go out and feel confident about what they’re doing – and really try and educate them through the process.
Do first home buyers require a high-touch service?
Yes, there’s definitely a lot more education, but there are two ways to look at it. You could look at it as a hassle, but I actually think that first home buyers are very loyal clients and they refer a lot.
Are there any other issues that are important to bear in mind with first home buyers?
I try and get the parents to come in as well so I can educate them at the same time. So that when I’m recommending a structure they don’t go home, half-explain it to the parents, and then the parents go, “No, that’s rubbish”.
