How access to a non-bank lender with a more favourable serviceability policy unlocked the purchase and the renovation budget — at a rate comparable to the major banks.
Rated 5 from 32 Reviews
A family looking to upsize found a property with strong potential — but it needed significant work. The plan was to buy the home, settle in, then undertake a substantial renovation. To make the project viable, they needed to purchase the property and retain enough cash to fund the renovation without taking out a separate construction loan down the track.
They had solid equity in their existing property and the financial position to support the loan. The challenge wasn’t their assets or their income — it was how the numbers were being assessed.
When assessing a home loan, all lenders apply a serviceability buffer — an additional margin added on top of the actual interest rate — to test whether borrowers could still meet their repayments if rates rose. Major banks are required to apply a 3% buffer above the loan’s interest rate. On a larger loan, that adds up quickly and can push borrowing capacity below what a client actually needs.
When the numbers were run with the major banks, serviceability was too tight — not because the clients couldn’t afford the loan, but because the 3% stress test reduced their assessed capacity below what was required to cover both the purchase and the renovation.
The solution wasn’t to find a different client or a cheaper property — it was to find a lender whose policies better reflected the actual risk in the transaction.
Rather than going back to the client with a reduced loan amount or suggesting they wait, the focus shifted to the lender panel. A non-bank lender was identified that applies a 2% serviceability buffer — not the 3% mandated for the major banks. That single percentage point was the difference between the deal working and not working. The transaction was then structured around three priorities.
| Identify the Right Lender | Structure the Debt to Include the Renovation | Choose the Right Product |
|---|---|---|
| A non-bank lender with a 2% serviceability buffer was identified from the panel, a full-doc, full-income-verified product, not a low-doc or high-fee alternative. The rates on offer were competitive with the major banks, meaning the client wasn't being asked to pay a premium for the flexibility. | The loan was sized to cover both the purchase price and the renovation budget in a single facility. Rather than requiring the clients to arrange separate finance later, the renovation funds were included upfront and structured so the money could sit in an offset account, reducing interest while the renovation plans were finalised. | An offset-linked loan was selected so that renovation funds held in the account worked to reduce the interest being charged from day one. The clients settled knowing the money was there, could commission their plans and builders at their own pace, and draw on the funds when they were ready, with no construction loan complexity. |
✓ Loan approved where the major banks couldn’t assist
✓ Full renovation budget secured within the loan
✓ Rate comparable to major bank pricing
✓ Full income verification — not a low-doc product
✓ Renovation funds in offset from settlement day one
✓ No construction loan complexity required"
Being told a deal doesn’t work at the major banks doesn’t mean the deal doesn’t work — it means you need to look further. In this case, a 1% difference in the serviceability buffer was the entire margin between approval and decline. The client had the income, the equity, and the means to service the loan. What they needed was a lender whose policies reflected that. Access to a broad lender panel — including well-priced, full-doc non-bank options — is what made the difference. The clients settled on their new home, their renovation funds were sitting in offset from day one, and the upgrade they had planned was able to proceed on their terms.
Contact Us
TS Finance Broking Pty Ltd ABN: 30 162 136 790, TS Finance Broking Pty Ltd ABN: 30 162 136 790. Credit Representative #436865 is authorised under Australian Credit License #389087.
Disclaimer: This page provides general information only and has been prepared without taking into account your objectives, financial situation or needs. We recommend that you consider whether it is appropriate for your circumstances and your full financial situation will need to be reviewed prior to acceptance of any offer or product. It does not constitute legal, tax or financial advice and you should always seek professional advice in relation to your individual circumstances.
Site by Broker Studio
