The Client
Jarred is self-employed. He runs a Computer repair and sales company. He had a tax debt of $120K that he defaulted on. However the ATO never forgets. He had a payment plan of $5,500 per month. He was planning to sell his house and downsize to attempt to clear the debt. The problem is that his house urgently needs renovation/repairs of about $100,000 to bring it up to market value of $850,000. The house is currently worth only about $750,000 and his mortgage is $300,000.
The Problem
Because of the ATO debt, he cannot borrow with normal banks. Many banks told him it could not be done. This is due to his Credit score being poor because of the debt defaults. Even if he had the money, he couldn’t get a builder to start for at least 6 months.
The Solution
We refinanced the existing mortgage from ($300,00) to an alt-doc lender. We borrowed against the equity for $150,000 to clear the ATO debt. The extra cash out $100K sat in an offset account and so he paid $0 on this until he actually used the cash, 6-7 months later. After 6 months (Interest only), his repayments were perfect (he no longer had to pay the ATO
$5,500 pm). His credit score was much improved and so we refinanced him back to a bank (at a much lower rate) based on 6 months of payslips he had been paying himself from his own company. In addition, the new bank paid him $2,000 just for refinancing to them. The works eventually started on the property and finished on time. The final house valuation was
$925,000. It sold at auction 2 months later for $955,000.
Jarred bought a unit for $500,000 and is now mortgage free.
