Broker Q & A: Melissa Gielnik, Smart Lending

In the early part of my career, specialist lenders didn’t actually exist. In the last eight to 10 years, they have taken more market share and brought products into the market that were really needed.

While I use three of the major banks quite consistently, there is always a spot for the specialist lenders in our client base.

We do a lot of self-employed. We have always used a specialist lender for the right type of deal. Of course, if they can go to a major bank, they do. But we find that there is always that client who needs a solution that fits a specialist lender.

What is your negotiation process with a client?

We look at the low-doc loans with the banks like ANZ and Bank of Melbourne. They are two low-doc products that we use quite heavily as well. Low-doc is only about 25 per cent of my business, but we would look at the major lenders first.

Depending on the type of information we receive, when we go to the specialist lenders, we don’t always position against what the client would have to pay in tax, but we say, “This is the option, these are the reasons why.

However, if you were to go this way, and this is the result of that, you could then go into a prime product with a major lender.”

So, we always give them a picture of what it looks like now and what it costs them, as opposed to getting all their financials up-to-date. But to most of them, that looks too daunting. They just take the higher rate, which at the moment really isn’t that high.

On one of the Pepper prime products, the rate was 5.1 per cent – that’s not high on any day of the week.

What are some typical clients you have put with specialist lenders?

One of our regular clients had always been PAYG, but two years ago started their own plastering business. They actually had six different investment loans with a major lender and were selling their own home to buy another home.

The changeover was only about $100,000. These clients had cash in the bank - they had everything going for them. But being a startup business, their returns weren’t attractive. So, we couldn’t put them back with the major lender, because the major lender saw too much of a gap. We were able to put them with Pepper.

They got a rate of 7.95 per cent, as opposed to 5.0 per cent, which is what they would have got with a major lender, but they were happy. The difference in payments for them each month was about $1,000, as they were looking at a $600,000 loan. But they either did that or nothing.

They wanted to buy some acreage, which would have cut down the client’s costs, as he would be able to use a shed for all his work gear, saving the cost of leasing another property.

It was the right option for them. What we will now do is work with them over the next 12 to 24 months at getting tax returns and moving them across to a major bank again. That is always the goal with putting clients with a specialist lender - we have a time period where we transition them back to a prime lender.