CIVMB LP T3-1 v3

The Lending Process
Topic 3-2: Developing and

presenting solutions
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Topic 3-2: Developing and presenting solutions
Certificate IV in Finance and Mortgage Broking
Contents
Overview ........................................................................................................ 3-2.3
Part 1: Stages of the loan process .................................................................... 3-2.4
1 The sales cycle ..................................................................................... 3-2.4
2 Stages of the loan cycle........................................................................ 3-2.5
Part 2: Review client needs ............................................................................. 3-2.6
3 Consider the customer’s needs ............................................................ 3-2.6
4 Risk profile .......................................................................................... 3-2.7
Part 3: Review home loan products ................................................................. 3-2.9
5 Research and gather additional information......................................... 3-2.9
6 Determining a loan product and product features ................................ 3-2.9
7 Home loan features ........................................................................... 3-2.17
8 Home loan services ............................................................................ 3-2.19
Part 4: Develop customer recommendations ................................................. 3-2.21
9 Loan structuring ................................................................................ 3-2.21
10 Determining recommendations ......................................................... 3-2.21
Part 5: Develop a customer presentation ....................................................... 3-2.25 3-2

11 Presenting the solution to the customer ............................................ 3-2.25
12 Communication skills for sales presentations ..................................... 3-2.26
13 Preparing a sales presentation ........................................................... 3-2.27
Part 6: Assisting a customer to make a choice ................................................ 3-2.33
14 Meeting with a customer ................................................................... 3-2.33
15 Recommend a product....................................................................... 3-2.34
16 Overcoming buyer resistance ............................................................. 3-2.35
© Kaplan Education Pty Ltd 3-2.1

Part 7: Obtain customer agreement............................................................... 3-2.41
18 Close the sale .................................................................................... 3-2.41
19 Obtain formal agreement .................................................................. 3-2.42
References .................................................................................................... 3-2.46
Suggested answers........................................................................................ 3-2.46
3-2.2 CIVMB_LP_T3-2_v3
Overview
Buying a house can be a stressful undertaking for the home buyer. This topic is about
the assistance a broker can provide in making recommendations about a home loan to
the customer, presenting those recommendations and assisting a customer with making
a decision.
Topic learning outcomes

On completing this topic, students should be able to:
• review customer needs and requirements
• research an appropriate solution for the customer
• develop recommendations for the customer
• prepare and deliver a sales presentation to the customer, outlining the
recommended solution, as well as all relevant home loan features, fees and charges
and other relevant information
• prepare sales aids
• clarify the customer’s understanding
• negotiate and address customer concerns and objections
• assist a customer to make an informed choice
• obtain customer agreement to proceed.
3-2

Part 1: Stages of the loan process

This section provides an overview of the stages of the loan process.
1 The sales cycle

The sales cycle was introduced in ‘Topic 2-2: Customer service’. This is the process a
mortgage broker follows to acquire a customer, find out the customer’s needs,
recommend a solution and then implement the customer’s decision, providing
ongoing service.
Below is a diagram showing the stages of the sales cycle.
2 Stages of the loan cycle

The table below summarises the activities at the different stages of the lending process
and indicates the participants involved.
Stage Activities Participants
Pre-credit • assess client needs • borrower
• collect data • mortgage broker or credit
• analyse data (clarify and challenge provider’s representative
where appropriate)
• identify solution
• submit application
Credit • receive application • credit provider

• collect and verify data
• assess application against credit
provider’s policies, underwriting
standard, guidelines and procedures
• either approve within DCA or submit to
relevant DCA holder with mitigant’s
recommendations
Post-credit • determine suitable collateral • credit provider

• obtain valuation prior to approval
• negotiate suitable security/collateral
and conditions
• prepare and send letter of offer
(terms and conditions)
Pre-settlement • sign letter of offer and credit provider’s • borrower

security/collateral documents • solicitor and/or conveyancer
• organise settlement • credit provider
Note: The lender’s role at this stage is
usually to ensure that the loan product
offered aligns with the application
approval.
Settlement • return all documents to the credit • borrower

provider for settlement action • solicitor and/or conveyancer
• attend settlement • credit provider
Post-settlement • stamp mortgage documents • borrower

• register mortgage • solicitor and/or conveyancer 3-2
• credit provider

Part 2: Review client needs

The assessment of the customer’s needs and requirements and assessment of the
customer’s appetite for risk was covered in detail in ‘Topic 3-1: Understanding the
client’s needs’. This section offers a brief review of these principles.
3 Consider the customer’s needs

In ‘Topic 3-1: Understanding the client’s needs’, you looked at customer needs.
These included:
• business needs
• customer’s debt position
• expectations of access to product
• expectations of income from this product
• expectations of life cycle and length of product
• family income
• security.
Apply your knowledge 1: Customer needs

Review customer needs in ‘Topic 3-1: Understanding the client’s needs’.
List some questions that you could ask a mortgage customer in order to
determine their needs in relation to a home loan.
Note: You can access ‘Suggested answers’ for this activity at the end of this topic.
4 Risk profile
In ‘Topic 3-1: Understanding the client’s needs’, you looked at customer attitudes to risk,
and how to determine risk and risk classifications. Some of the risk factors discussed
included:
• access restrictions on product
• borrowing risk and gearing
• market and sector risks:
– economic cycle
– monetary policy
• how risk factors affect expectations of a return
• specific product risks
• property risks, such as taking on too much debt.
Apply your knowledge 2: Risk

Review customer risk profile and risk tolerance in
‘Topic 3-1: Understanding the client’s needs’ and answer the
following questions.
1. What is risk?
2. Briefly describe low, medium and high risk tolerance.
3-2

3. How can you determine a customer’s appetite or tolerance for risk?
4. Name some home loans products or features that may be

considered risky.
5. What are some examples of market risks and what is their impact on
home loans?
6. What are some examples of property risks?
Part 3: Review home loan products

This section covers some of the aspects of home loan mortgage products that a
mortgage broker may need to consider in making a recommendation to a customer.
For more information on mortgage product types and features,
see ‘Topic 1-3: Products and services’.
5 Research and gather additional information

Sources of information for brokers about the financial services market and the credit
providers working within it include:
• financial reports and brochures from credit providers
• internet research into the credit provider
• new company information about products, services and special features
• statistics from respected magazines and consumer reports such as:
– Australian Broker Online, viewed 13 March 2017,
<http://www.brokernews.com.au>
– Mortgage Professional Australia, viewed 13 March 2017,
<http://www.mpamagazine.com.au>
– Australian Property Investor, viewed 13 March 2017,
<http://www.apimagazine.com.au>.
6 Determining a loan product and

product features
6.1 Loan size

A mortgage broker must provide advice on an appropriate loan amount for which
borrowers should apply. Consider the following points:
3-2
• Most credit providers assume very low general living expenses in their calculation
when deciding how much to lend. When borrowing over a long period, such as 20 or
30 years, this amount may be less than many people actually needed to maintain a
decent standard of living. However, a person’s salary generally increases over time
with career progression and experience.
• Since the commencement of responsible lending legislation, many credit providers
ask borrowers to estimate their monthly living costs. Disclosing a borrower’s true
living costs can result in the amount that a credit provider will provide being reduced.
• Other factors to be considered include the borrower’s frugality, marginal tax rate and
future plans such as to have a family, study, travel, renovate etc.

Example: 35% of gross annual salary

Some state that as a general rule of thumb, a home loan should not require
repayments greater than 35% of gross income.
Assume Joanne earns a salary of $85,000 gross (before tax) per year.
She is single, has no dependants and has no other debts.
35% of gross income: 0.35 × 85,000 = $29,750 p.a.
Therefore Joanne’s maximum repayments should be no more than
$29,750 p.a. or $2,479 per month.
Assuming interest rates of 7% p.a. and a loan term of 30 years,
Joanne should borrow no more than $372,700.
Apply your knowledge 3: How much can a loan

applicant borrow?
Use a mortgage calculator such as those shown below to answer the
• Your Mortgage ‘How much can I borrow? Mortgage calculator’,
viewed 13 March 2017,
<http://www.yourmortgage.com.au/calculators/affordability>.
• Mortgage and Financial Help calculators, viewed 13 March 2017,
<http://www.mortgageandfinancehelp.com.au/category/calculators>.
In each case, assume a standard variable loan with a loan term of 30 years.
Determine how much the applicants can borrow and how much the
repayments will be. You may like to compare the different credit providers
to see if the limits are different.
1. A person with a gross annual salary of $85,000 and monthly living
expenses of $1,200, with no dependants.
3-2.10 CIVMB_LP_T3-2_v3
2. Joint applicants with three children and a combined gross income of

$150,000 p.a., monthly living expenses of $1,800, a monthly car loan
repayment of $200 and a credit card limit of $4,000.
3. Joint applicants with a combined income of $300,000,

with two dependants, monthly living expenses of $5,000,
monthly personal loan repayments of $2,000 and credit card limits
of $10,000.
3-2
Note: This activity requires independent research, therefore no suggested answers are provided.

6.2 Determining the home loan product

The mortgage broker needs to determine:
• which type of home loan is best for the customer
• the credit provider and the specific home loan product.
This is usually accomplished by:
• administering a fact-finding questionnaire
• determining the customer’s risk profile
• determining the likelihood of changes to the customer’s situation in the future.
Apply your knowledge 4: Variable home loan products

Complete your own research into variable home loan products
currently available.
1. List some key criteria that a borrower may use in determining which
home loan product to purchase.
2. Using these criteria, determine which are currently the best deals on
variable home loans. Make notes about the types of customers for
whom you might recommend these products.
3. As a mortgage broker, how can you use home loan comparison websites
to help your customers with their decisions?
Note: You can access a ‘Suggested answer’ for Question 1 at the end of this topic.
3-2.12 CIVMB_LP_T3-2_v3
6.3 Term
Generally, borrowers are in the best position to decide what they can afford by way of
loan repayments. Where they have requested a shorter term that would be against your
guidelines for commitment levels, it may be possible to approve the loan over a longer
term but with the capacity to make increased repayments. This gives the borrower the
flexibility to reduce the repayment amount without renegotiating the mortgage should
the higher levels become a strain.
6.4 Repayments
Structuring of repayments may include a period of accelerated repayments at the
beginning, particularly for two-income families. This provides scope to reduce
repayments should one borrower stop earning.
Does the loan type selected allow for additional or bulk repayments? Many fixed rate
loans do not allow borrowers to make extra repayments until the expiry of the fixed rate
period. This may not be suitable for people with ‘lumpy’ incomes or where the sale of
some other asset is expected during the fixed rate period.
6.5 Fixed versus variable interest rates
Interest rate type

• Variable rate — variable rate loans are usually the most flexible, allowing voluntary
payments without penalties. Many loan products offer the option to redraw
voluntary repayments at a later date without the need to reapply for finance.
• Fixed rate — the most beneficial aspect of a fixed rate loan is the certainty of
repayments during the fixed period. This is especially useful when commitment levels
are high and there would be doubt about the borrower’s capacity to meet the
increased repayments if interest rates were to rise.
However, penalties can apply to early repayment of all or a portion of fixed rate
loans. These penalties are called ‘break costs’, referring to the cost of breaking a
fixed rate loan contract. Break costs apply where the credit provider can establish
that it has suffered a loss due to a downward movement in funding costs from the
time the loan was drawn to the time it was repaid. Although the loan is repaid, the 3-2
credit provider must still carry the cost of the loan until the end of the original fixed
rate period.
• Split rate — split rate loans are common in home lending and offer a combination
loan consisting of a variable interest component and a fixed interest component.
The proportion of variable to fixed rate can be varied to meet individual
borrower’s requirements.
Split rate loans are popular when there is a perception that interest rates will rise.
Borrowers can fix the interest rate on a portion of their loan, providing a degree of
certainty about their repayment obligations. Should interest rates fall, borrowers are
also partially protected because of the variable component of the split loan,
which means that the required repayment amounts will fall.
Many home loans provide borrowers with the ability to switch between variable and
fixed rates to split interest rates. Fees and charges may apply for switching.

Deciding between interest rate types

The decision about fixing a loan is often a matter of customer preference. A mortgage
broker may advise customers to consider fixing a loan if interest rates are on the rise
and may go up considerably, putting financial stress on the borrower.
Customers can also consider fixing a part of their loan. Fixing the entire loan amount
makes the loan considerably less flexible.
Further resources: Fixed interest versus variable interest rate loans

MoneySmart n.d., Fixed vs variable home loans, Australian Securities and
Investments Commission, viewed 13 March 2017,
<https://www.moneysmart.gov.au/borrowing-and-credit/home-
loans/fixed-vs-variable-home-loans>.
6.6 Line of credit loans

A line of credit allows a customer to access the equity he or she has in their home to
borrow at home loan rates for other purposes.
The equity in a home is the difference between its value and the amount owed on it.
For example, if the home is worth $500,000 and a total of $300,000 is owed, the equity
is $200,000.
A line of credit secured by the property allows a customer to access the equity;
for example, for investment or purchases such as a car or holiday.
Line of credit loans can be very useful, especially for:
• non-structural renovations
• investment purposes, such as the purchase of shares
• investors needing to smooth out cash flow fluctuations.
If the credit provider allows it, this option can be much cheaper than a normal
business overdraft.
3-2.14 CIVMB_LP_T3-2_v3
6.7 Regulatory compliance
Apply your knowledge 5: Review of client interaction and

NCCP Act
In ‘Topic 1-2: Legislation and codes of practice’, you covered the
National Consumer Credit Protection Act 2009 (Cth) (NCCP Act) and the
National Credit Code (NCC). Review this material and then answer the
questions below.
1. List at least three (3) financial products or transactions regulated by
the NCC.
2. List at least three (3) financial products or transactions not regulated by

the NCCP Act.
3-2
3. True or false?
All employees of credit providers may be held personally liable if they
are in some way connected with or responsible for a breach of the NCC.

4. Under the NCC, what are unjust transactions?
5. List at least two (2) types of correspondence with borrowers that are
required under the NCC.
6. List the documentation that must be provided to the borrower under

the NCC.
3-2.16 CIVMB_LP_T3-2_v3
7 Home loan features

There are a number of home loan features that can make one home loan product more
attractive to the borrower than others.
For more information, see ‘Topic 1-3: Products and services’.
7.1 Interest offset accounts

Consider recommending a loan with an offset account. Customers are usually advised to
take one, especially where the customer does not have to pay a higher interest rate for
the privilege.
7.2 Redraw facility

A redraw facility allows the borrower to withdraw additional repayments which have
been made, subject to certain terms and conditions. The terms and conditions vary
significantly between loans.
Apply your knowledge 6: Redraw

Compare loans with a redraw facility from three different credit providers.
Complete the table below with the details of the:
• credit provider
• loan product
• redraw feature details.
Credit provider
Product name
Number of free
redraws per year
Fee per redraw 3-2

Feature description
Maximum
number of
redraws per year
Minimum
redraw amount
Maximum
redraw amount
Other
Note: This activity requires independent research, therefore no suggested answer is provided.

7.3 Flexibility of payments

Most loan repayments are due monthly but some credit providers allow borrowers to
pay fortnightly or weekly.
In other words, instead of making the once-a-month mortgage repayment:
• for fortnightly payments, the credit provider allows the borrower to pay half the
monthly mortgage payment every two weeks
• for weekly payments, the credit provider allows the borrower to pay one-quarter of
the monthly mortgage payment every week.
In effect, the borrower is making extra payments each year, as there are more than
four weeks in a calendar month. This reduces the term of the loan and therefore the
interest paid. As interest on home loans is calculated daily, it can mean savings for the
borrower in the long run. The more the borrower pays off the principal amount, the less
interest is paid over the long term.
Apply your knowledge 7: Weekly or fortnightly payments

compared to monthly payments
Access an online mortgage calculator provided by a credit provider, or refer
to the mortgage calculator provided in your subject room.
1. Use a mortgage calculator to demonstrate the interest and time saved
on a mortgage using weekly or fortnightly payments.
2. Develop and practise a script to explain this concept to a home loan
borrower, using examples.
3. Investigate which credit providers allow weekly or fortnightly payments

on which types of mortgage products.
3-2.18 CIVMB_LP_T3-2_v3
8 Home loan services
8.1 Broker services

A broker offering home loan services may be attractive to a potential borrower
because of:
• personalised service
• the broker’s location; for example, the broker may be located close to the
borrower or be knowledgeable about the property market in which the borrower
wishes to invest
• the broker’s training and qualifications
• the broker’s tools and software and the skills and experience they have in using them
• the broker’s access to a panel of lenders
• the number and credibility of the lenders on the broker’s panel of lenders.
8.2 Credit provider information

The broker must disclose to the client his or her strategic and commercial relationships
with the credit provider and the broker organisation in order to recommended products.
This is especially important if there is an exclusive relationship between the credit
provider and the broker.
8.3 Credit provider services

Home loan services offered by credit providers that may be attractive to a potential
borrower include:
• length of experience and service, that is, how long the credit provider has been
established in Australia
• the number of loans that the credit provider writes
• the security of the credit provider in the market, including the amount of funds
available to them
• the diversity of services offered including: 3-2
– other types of finance, such as residential, commercial, vehicle and equipment
finance, as well as refinancing and personal loans
– other products, such as credit cards or savings and investment accounts.
For more information, see ‘Topic 1-3: Products and services’.
8.4 Awareness of services

Home loan services may be marketed by:
• testimonials from satisfied customers on websites or promotional materials
• word of mouth from satisfied customers
• awards such as Better Business or industry awards displayed on websites or
promotional materials.

8.5 Discredited companies

The Australian Securities and Investments Commission (ASIC) maintains a list of
businesses that have:
• made unsolicited calls and emails to Australians
• do not hold a current Australian financial services licence or Australian credit services
licence from ASIC.
Further resources: Home loan services — discredited companies

Moneysmart n.d., Companies you should not deal with, Australian Securities
and Investments Commission, viewed 13 March 2017,
<https://www.moneysmart.gov.au/scams/companies-you-should-not-deal-
with>.
3-2.20 CIVMB_LP_T3-2_v3
Part 4: Develop customer recommendations

After an initial meeting with the customer where you looked at the customer’s needs
and risk level and gathered some information about them, you then need to develop
recommendations for the customer.
9 Loan structuring
As the mortgage broker, after reviewing all aspects of the customer’s situation you
are in a position to determine the optimum structure of the loan. In many cases,
particularly with standard consumer loans, the structure is determined at the initial
application stage.
The structuring of commercial loans, on the other hand, can be lengthy and involve
considerable negotiation.
Some basic aspects that need to be considered, and which are particularly relevant to
consumer lending when structuring the loan, include:
• term — see ‘Term’ in section 6.3
• repayments — see ‘Repayments’ in section 6.4
• interest rate type, such as variable, fixed or split rate — see ‘Fixed versus variable
interest rates’ in section 6.5.
For more information on these, please refer to Part 3, section 6.
10 Determining recommendations
Apply your knowledge 8: Case studies — recommending a
product
The case studies presented in ‘Topic 3-1: Understanding the client’s needs’
are shown below. In that topic you looked more deeply at these customer’s
needs and their attitudes to risk.
In this activity, building on your initial work, propose the home loan or 3-2
investment strategy you would recommend for the customers in each
case, including:
• the loan product and type
• the credit provider
• the loan facilities or features most appropriate
• a justification for each of your recommendations.
Where the details of the case study are insufficient, feel free to add detail
as required.

1. Raghav is a South Australian Government employee based in Adelaide.

He is single, age 29, and lives with his parents. He is interested in buying
an investment property and wants to continue living with his parents
and rent out the property using a negative gearing strategy. Raghav does
not envisage marriage or starting a family in the near future.
2. Tim, 50, and Sarah, 34, have a mortgage on their Brisbane home.
They have twin daughters, Megan and Gabrielle, who are two years old.
Tim is a plumber with his own business and Sarah is staying home to
look after their young children but wishes to return to her career as a
hairdresser in a year’s time. Nearly three years ago they fixed their
mortgage for three years at 6.39%, when variable rates were around
7.1%. Since then, interest rates have fallen to around 5.5%. They are
considering their options as the end of the fixed rate period of their
mortgage approaches.
3-2.22 CIVMB_LP_T3-2_v3
3. Ray, 37, and John, 34, are a couple currently renting a property in
Paddington, Sydney. Ray is a project manager working in information
technology implementation and John is a medical specialist working at a
large public hospital. They are both career oriented, ambitious and earn
large salaries. Between them they can liquidate other investments to
come up with a substantial deposit. They are keen to purchase a
Paddington terrace house close to the city and to be near favoured
restaurants and entertainment venues.
4. Suji is a 45-year-old graphic designer working for a large

Melbourne-based communications firm. She recently inherited some
money after an aunt passed away and wants to use this money as a
deposit for a newly renovated two-bedroom flat in Richmond. This will
be her first property.
3-2

5. Angelica and Carmine are homeowners. They have a mortgage, car loan,
personal loans, credit cards and a store account. Their monthly living
expenses are approximately $1900 and with interest rates on the rise,
they are experiencing more of a squeeze.
3-2.24 CIVMB_LP_T3-2_v3
Part 5: Develop a customer presentation

Once you have developed your recommendations for the customer, you must present
them to the customer for approval.
This section focuses on presenting the recommended solution to the customer in a
sales presentation.
11 Presenting the solution to the customer

Before you begin your presentation, ensure you know your customer. Understand their
level of financial knowledge. Appreciate any special needs they have.
When presenting the solution to the customer:
• describe the solution in easily understandable terms
• link the features of the solution to the customer’s needs
• provide the customer with all the necessary documentation
• explain the terms, conditions and other details associated with the solution
• disclose fees and charges
• explain relevant product details.
11.1 A product that is ‘not unsuitable’

Where the credit is covered by the NCCP Act, make all reasonable efforts to ensure that
the home loan product or service offered or requested is ‘not unsuitable’ for the
customer and for the intended purpose.
3-2

12 Communication skills for sales presentations

Excellent communication skills are vital for sales presentations. A broker in a sales
situation must use communication skills to:
• persuade customers to share information
• build rapport
• explain the features and benefits of the solution
• overcome objections
• negotiate with the customer
• assist the customer to make a decision.
12.1 Communication skills for sales

Some important communication skills required for selling include:
• Presenting a prepared presentation — present without sounding stilted
or unnatural.
• Improvising a presentation — a broker may need to improvise a presentation
in unexpected circumstances, or change a prepared presentation when it is
not working.
• Speaking to strangers — a broker may need to meet and network with new people
(or sales prospects) and develop an instant rapport to engage them into a sales
meeting if appropriate. This requires the ability to make ‘small talk’, start casual
conversations and spot sales prospects.
• Handling unhappy customers — a broker may need to handle customers who are
unhappy or stressed, dissatisfied with customer service from your organisation or
from you.
• Leading a meeting — a broker needs to have the confidence to be able to lead a
meeting with customers.
• Negotiation — a broker needs to be able to negotiate and close sales with a
customer, ensuring that they are happy and may become a repeat customer.
• Non-verbal skills — a broker must use appropriate body language for the situation,
the customer and the culture.
• Persuasive techniques — a broker needs to persuade the customer and close
the sale.
• Questioning techniques — a broker must explore customer preferences and needs
and obtain information.
For more information, see:
• ‘Negotiation skills’ in Part 6, section 17.2
• ‘Topic 2-1: Organisations, teams and individuals’ for communication skills such as
questioning, speaking, listening and non-verbal communication skills
• ‘Topic 2-3: Managing information’ for written communication skills
• ‘Topic 2-2: Customer service’ and ‘Topic 3-1: Understanding the client’s needs’ for
customer service and building rapport.
3-2.26 CIVMB_LP_T3-2_v3
Further resources: Communication skills for sales

The following articles and videos have been selected for their discussion of
communication skills, specifically within the sales domain.
Listening:
• Antonio, V 2013, Effective listening skills — why listening is hard,
but also, why it’s effective in selling, online video, 22 February,
<https://www.youtube.com/watch?v=DpxteBi1K58&list=PLA6As4Un47h
_SpUmvZ-EPpcS50N0w2lLF>.
Verbal and non-verbal skills:
• Goman, CK 2013, ‘Six verbal and nonverbal tips for selling products,
services or ideas’, Forbes, 17 June, viewed 13 March 2017,
<http://www.forbes.com/sites/carolkinseygoman/2013/06/17/six-
verbal-and-nonverbal-tips-for-selling-products-services-or-ideas>.
• Rosenthal, B 2010, ‘Making an effective presentation’, Forbes,
24 February, viewed 13 March 2017,
<http://www.forbes.com/2010/02/24/effective-presentation-skills-
leadership-careers-rosenthal.html>.
Written sales documents:
• Barrett, S 2012, ‘5 key tips for a better sales proposal’,
Marketing Magazine, 24 April, viewed 13 March 2017,
<http://www.marketingmag.com.au/blogs/5-key-tips-for-a-better-sales-
proposal-13072/#.VBuHkRbgXTA>.
• Sittig-Rolf, A 2012, ‘Proposals that sell: how to write a winning sales
proposal’, Huffington Post Business, 3 February, viewed 13 March 2017,
<http://www.huffingtonpost.com/andrea-sittigrolf/proposals-that-sell-how-
t_b_1316010.html>.
13 Preparing a sales presentation

Despite occasionally appearing to be improvised, sales presentations are not composed
spontaneously. Typically, a lot of thought and work goes into a sales presentation prior
to meeting the customer. This involves: 3-2
• getting to know the customer and understanding the customer’s needs. For more
information, see ‘Topic 3-1: Understanding the client’s needs’
• building rapport with the customer. For more information,
see ‘Topic 3-1: Understanding the client’s needs’
• analysing the information provided by the customer
• devising a solution
• determining a sales strategy
• preparing a presentation to deliver the message
• preparing sales aids for your presentation.

13.1 Develop a customer presentation
Apply your knowledge 9: Develop a sales presentation

Review this interesting and well-presented video course on delivering an
effective sales presentation. Although developed for a complex sale to
multiple customers, the principles shown are sound and apply to presenting
to home loan customers.
• Blount, J 2016, 4 Tips for Delivering More Engaging Sales Presentations,
online video, 30 June, viewed 13 March 2017,
<https://www.youtube.com/watch?v=cjCQmNCoRXU>.
Using the tips presented in the video, develop a sales presentation for at
least one (1) of the case studies you worked on in ‘Apply your knowledge 8:
Case studies — recommending a product’.
Assume that you are a mortgage broker and you are meeting the customers
in your office for a 30–45-minute meeting. Your sales presentation
should include:
• your recommendations for a home loan strategy and solution for
the customer
• the sequencing of events for the presentation
• sales tools you might use to convince the customer
• the goal or outcome of the meeting, that is, what you want the
customer to do at the conclusion of the meeting.
3-2.28 CIVMB_LP_T3-2_v3
Further resources: Creating effective presentations

These articles and videos provide tips and hints on creating great
sales presentations:
• Present like Steve Jobs 2008, online video, BNET Video, 17 April,
<https://www.youtube.com/watch?v=2-ntLGOyHw4>.
• Entrepreneur 2014, ‘How you can make your next presentation
memorable’, Entrepreneur, 24 March, viewed 13 March 2017,
<http://www.entrepreneur.com/article/232439>.
• Entrepreneur 2014, ‘Need to make a presentation? Start by telling a
great story’, Entrepreneur, 26 March, viewed 13 March 2017,
• Pelletier, R 2014, ‘4 tips to help introverts nail a presentation’,
Entrepreneur, 7 July, viewed 13 March 2017,
• Robertson, K 2011, How to create the perfect sales presentation,
Growth University, 1 November, viewed 13 March 2017,
<https://www.futuresimple.com/blog/create-the-perfect-sales-
presentation>.
13.2 Developing sales aids for presentations

A sales presentation may be presented:
• in document format
• using presentation software
• using overhead transparencies
• using other presentation methods.
For more information on using PowerPoint and developing presentations,
see ‘Topic 2-1: Organisations, teams and individuals’.
Using PowerPoint for sales presentations

PowerPoint is the most popular computer slide software used in businesses today.
Many people use PowerPoint to develop sales presentations because it is able to 3-2
easily combine graphical and text elements, along with the capacity to create graphs
and animations.
Extensive help, resources and training materials, including ‘how to’ videos and user
forums, are available on Microsoft’s website, viewed 13 March 2017,
<www.support.office.com/en-us/article/Basic-tasks-in-PowerPoint-2010-35308dfb-
792d-400a-b69a-1188b019c66a>.

Alternatives to PowerPoint
While the use of PowerPoint for presentations is widely accepted in business, it may not
be an appropriate way to present a home loan solution to many home buyers.
The format may not be useful for some customers who perhaps would prefer to discuss
options in a more personal way.
Some customers may find a formal PowerPoint presentation excessive, and possibly
even a bit intimidating. For these customers, it may be useful to present options in
writing or with one or two simple, printed graphics.
Developing visual aids

Visual aids are indispensable sales tools. For example, a graph showing the difference in
paying weekly or fortnightly compared to monthly loan repayments over the period of a
30-year loan can be very powerful for a potential home buyer.
When developing visual aids:
• use colour with discretion and choose colours carefully
• use colours that provide good contrast — dark colours on light backgrounds provide
the maximum contrast
• do not clutter graphics with lots of detail
• keep it simple — use a graphic to make a single point, allowing the customer to grasp
the point you are communicating immediately
• simplify complex data
• provide handouts of more complex data if you want the customer to analyse or
compare detailed figures
• distil sentences down to the key ideas or concepts, as text in a presentation needs to
be simple.
Apply your knowledge 10: Tips for developing sales aids

Review the following articles and videos on developing effective
PowerPoint presentations:
• Gallo, C 2014, ‘Avoid the PowerPoint trap by having less wordy slides’,
Entrepreneur, 17 March, viewed 13 March 2017,
• Meyer, SJ 2014, ‘Persuasion: fascinating study shows how to open a
closed mind’, Forbes, 12 June, viewed 13 March 2017,
<http://www.forbes.com/sites/stevemeyer/2014/06/12/persuasion-
fascinating-study-shows-how-to-open-a-closed-mind>.
• Roos, D & Toothman, J n.d., 10 tips for more effective PowerPoint
presentations, HowStuffWorks, viewed 13 March 2017,
<http://money.howstuffworks.com/business-communications/effective-
powerpoint-presentations.htm#page=0>.
• Shandrow, KL 2014, ‘10 questions to ask when creating a killer PowerPoint
presentation’, Entrepreneur, 22 January, viewed 13 March 2017,
Develop up to 10 PowerPoint slides to support the sales presentation you
developed in ‘Apply your knowledge 9: Develop a sales presentation’ in
Part 5, section 13.1.
3-2.30 CIVMB_LP_T3-2_v3
Sequence the slides appropriately and practise your presentation using

your sales aids.
3-2

13.3 Documentation to be provided to the customer

MoneySmart (n.d.) outlines the following conditions in relation to documentation:
Anyone engaging in credit activities (by providing credit or credit assistance
to you) must give you a credit guide and credit proposal disclosure
document with information such as:
• their licence number
• contact details
• fees and charges
• details of your right to complain or a written contact details to access
their External Dispute Resolution Scheme (EDR).
Unless the credit provider has already entered into a written contract with
you setting out the maximum amount you will pay for their services or they
are providing services free of charge, they must also give you a quote for
providing credit assistance.
Other information that may need to be presented to the customer in a sales
presentation includes the credit provider’s:
• general terms and conditions for the home loan product
• terms and conditions for the loan agreement
• schedule of relevant fees and charges.
Documentation may be developed by the broker to assist the home loan buyer with
their choice. For more information, see ‘Topic 2-3: Managing information’.
Apply your knowledge 11: Identifying product documentation to

be provided to the customer
1. For your chosen customer scenario from ‘Apply your knowledge 9:
Develop a sales presentation’ in Part 5, section 13.1, identify the types of
documentation that you need to provide to the customer during your
sales presentation.
Ensure all information is organised clearly and concisely, appropriate to
the client’s needs and level of understanding.
2. Practise your sales presentation, including the sequencing of the

documentation you will provide to the customer.
3-2.32 CIVMB_LP_T3-2_v3
Part 6: Assisting a customer to make a choice

After all the sales presentations and persuasion, it is time for the customer to make a
choice. The broker may be required to assist the customer towards a decision in order to
close the sale.
14 Meeting with a customer

Some important tips for meeting with a customer are shown below.
• Be polite and respectful. Use the customers’ names. Manage introductions if
required.
• Make customers feel at home and relaxed. Invite customers to be seated.
Offer simple courtesies such as a cup of tea, coffee or a glass of water.
• Do not bombard the customer with the sales pitch from the beginning, but welcome
them and spend a little time in casual conversation. Notice something about the
customer, or recall details from previous meetings, such as enquiring about children,
hobbies or interests.
• Turn off your phone and give your full attention to the customer. Do not be
distracted by anything else.
• Take brief notes, if required. Explain to the customer what you are doing.
Do not be distracted by note taking, as the customer requires your attention.
• Be aware of any cross-cultural communication issues or special needs, such as
wheelchair access. For more information, see ‘Topic 2-2: Customer service’.
• Speak authentically.
• Have a clear goal for the meeting with actions to be taken by either you or your
customer at the conclusion.
• At the conclusion of the meeting, thank the customer for their time.
3-2

15 Recommend a product
It is important for a broker to recommend a product and its features to the customer in
a clear and unambiguous way.
Discuss the impact of recommendations clearly and comprehensively, including
strengths, weaknesses, benefits and risks.
For more on products and features, see:
• ‘Review home loan products’ in Part 3.
• ‘Topic 1-3: Products and services’.
15.1 Fees and charges

Explain all fees, charges and commissions clearly to the customer, including:
• commissions from lenders
• commissions paid to franchisees
• deposit
• interest payments
• loan establishment fees
• loan value fees
• taxes and payments to secure a property
• stamp duty
• trailing commissions.
Many people only look at the interest rate when comparing credit options and offerings.
This can be misleading as other costs and charges can have a significant impact on the
overall cost of the loan.
Other costs and charges may include the following:
• establishment fees
• account keeping fees
• late payment fees
• guarantee fees (where applicable)
• settlement fees
• early repayment fees.
For more information on fees and charges, see ‘Topic 3-1: Understanding the client’s
needs’.
Comparison rates
The NCCP Act requires providers of consumer credit to supply a comparison rate when
advertising their interest rates. This is due to the possible addition of various fees and
charges, and to make it easier for consumers to compare the total cost of credit
offerings from different providers. The comparison rate takes into account additional
fees and charges such as those listed above, as well as factors such as the duration of
the loan.
3-2.34 CIVMB_LP_T3-2_v3
16 Overcoming buyer resistance

Review the section on overcoming buyer resistance in ‘Topic 2-2: Customer service’.
As stated earlier in this course, customer objections are a normal and healthy part of the
sales process. All salespersons need to have strategies and arguments to help customers
to make a decision.
In ‘Topic 2-2: Customer service’, you learnt about some ways to handle common buyer
objections such as:
• product objections
• price objections
• timing objections
• negative feelings or a lack of engagement.
In ‘Topic 3-1: Understanding the client’s needs’, you learnt about:
• ways to build rapport and engage the customer
• reasons a customer may use a broker
• ways to reassure the customer and prove the credibility of the broker and the
broker organisation.
16.1 Tips for overcoming customer objections

Listen to the customer objection carefully. Draw on your resources, knowledge and
preparation for the meeting, and address the specific customer concerns, rather than
responding with generalities. If possible, use the customer’s language or examples when
addressing the concern.
A useful technique in dealing with objections is to question the customer. Turn the
objection into a question to help clarify the customer’s objection. For example,
ask open-ended questions such as ‘Tell me more about your last statement …’
or ‘What makes you say that?’
Sometimes the customer will not really have thought too much about their objection
before speaking. Further questioning can either resolve the objection or alert the broker
to the source of the customer’s discomfort.
3-2
16.2 Handling price objections
It is normal and sensible that home loan buyers are focused on getting the home loan
with the lowest possible interest rate, because even a small variance can make a big
difference to loan payments over time.
• When discussing home loans, refer to the comparison interest rate rather than the
displayed interest rate. The comparison interest rate includes the interest rate or
weekly repayment amount, plus most fees and charges. This is an easier way to
compare home loans.
• Where a loan has a higher interest rate, concede the price difference but explain that
there are other benefits such as offset accounts, redraw facilities or additional
accounts, including credit cards. Make differences and benefits between loan choices
very clear.

16.3 Handling complacency objections

Often customers will feel overwhelmed by the decision that they need to make or
intimidated by the amount of money that is being discussed. This is a normal reaction.
When a customer says something like ‘I’ll think about it’, as the mortgage broker you
can:
• offer to provide assistance by saying something like, ‘Is there any information I can
provide to help you with that decision?’ or
• add a sense of urgency by asking, ‘Can I check back with you later in the week to see
what your decision is?’
16.4 Lacking authority to make a decision

Ensure that the people you are speaking to have the authority to make a decision about
the home loan. For example, if there is more than one applicant, ensure that all
applicants are there for the presentation.
If one person in a couple typically makes the financial decisions, he or she is the person
you need to convince. They obviously need to be in the meeting. But do not neglect the
other applicant, because they must give their informed consent as a partner in the home
loan application.
As a mortgage broker, you may encounter objections such as ‘Let me talk to my
wife/husband’ or ‘My partner is still undecided’. Address these objections by asking a
question such as:
• ‘Would you like me to speak with them and explain this in greater detail?’
• ‘When would be a good time to follow up after the two of you have had a chance
to speak?’
16.5 Translation or boomerang technique

The translation or boomerang technique is a way for the broker to translate the reason
that the customer gives not to buy into a reason to buy. For example, a customer may
voice an objection such as, ‘I am not sure I am comfortable doing business with the
ACME organisation as they rarely deal with customers like me who require a commercial
loan …’.
The broker can turn this around by saying, ‘You’re right, ACME brokers have not dealt
with commercial loan customers like you much in the past. That is exactly why we want
your business. ACME has recently taken the decision to actively pursue the commercial
loan market, and we can offer you some interesting options and great deals’.
The broker acknowledges the objection, and turns it into a reason for the customer
to buy.
3-2.36 CIVMB_LP_T3-2_v3
16.6 Direct denial

Another way of approaching a buyer’s objection is direct denial, where applicable. If the
customer restates a misconception or has misunderstood something, it is appropriate to
correct the misunderstanding directly. For example, when a customer voices this
misconception, the broker may say, ‘No, you’ve heard incorrectly. You can use the
equity in your home to help fund an investment’.
16.7 Indirect denial

A kinder and gentler way of correcting a customer’s misconceptions is indirect denial.
The broker can gently correct the customer’s misconception, or refer to commonly held
misconceptions on the subject. For example, the broker could say, ‘Many people think
that all home loans are pretty much the same. Not true! Let me show you how a variable
loan and a fixed interest rate loan compare. Take a look at this graph’.
Alternatively, the broker could say, ‘Yes, I have also heard that some people think they
need to pay the broker to handle the application form. Actually, most brokers do not
charge a fee to customers as they are compensated by the lender’.
16.8 Compensation
A customer will occasionally notice a disadvantage to a product and point it out. It is
appropriate for the broker to acknowledge the disadvantage and then try to show that
there are compensating benefits. For example the customer may say, ‘This loan from
Bank A has a higher interest rate than the loan from Bank B’.
The broker may respond, ‘Yes, that’s true. However, the Bank A loan offers an offset
account linked to your home loan. Any deposits to the account, such as your salary or
other income, will offset the loan balance while allowing you easy access to your money.
This can help you to save thousands of dollars in interest and cut years off the term of
your home loan’.
16.9 Cognitive dissonance and buyer’s remorse

Cognitive dissonance is the mental stress or discomfort experienced by an individual 3-2
who holds two or more contradictory beliefs, ideas, or values at the same time, or is
confronted by new information that conflicts with existing beliefs, ideas, or values.
Buyer’s remorse is the sense of regret after having made a purchase. It is frequently
associated with the purchase of an expensive item such as a car or house. It may stem
from fear of having made the wrong choice, guilt over extravagance, or a suspicion of
having been overly influenced by the seller.
Buyer’s remorse is thought to stem from cognitive dissonance —
specifically post-decision dissonance — that arises when a person must make a
difficult decision, such as a heavily invested purchase between two similarly
appealing alternatives.

16.10 Practise overcoming buyer resistance
Apply your knowledge 12: Overcoming buyer resistance

This well-produced video provides a research-based approach and practical
tips for addressing buyer resistance in a sales presentation:
• Blount, J 2016, 4 Keys to Overcoming Sales Objections, online video,
29 June, viewed 5 December 2016,
<https://www.youtube.com/watch?v=lKvXYh3X5kI>
1. For your chosen customer scenario, from ’Apply your knowledge 9:
Develop a sales presentation’ in Part 5, section 13.1, identify the likely
objections your customer may have to the recommendations you make,
based on their circumstances and risk profile.
2. For each objection, identify the arguments to overcome these

objections, drawing on previous work in this topic, your product
knowledge and awareness of the economy and market.
3. Sequence these arguments to overcome objections within your

presentation, as shown in the video course.
Practise your sales presentation incorporating these arguments.
3-2.38 CIVMB_LP_T3-2_v3
17 Address customer concerns and discuss

options
It is important to address any customer concerns raised during the presentation or
meeting and discuss all options available to the customer. Do not let the customer walk
away from this meeting with a concern that you have not addressed in some way.
17.1 Provide appropriate documentation

Provide the customer with appropriate documentation including:
• disclaimers
• product disclosures
• product application forms
• written advice.
17.2 Negotiation skills

You may need to sharpen your negotiation skills when dealing with customer objections.
Apply your knowledge 13: Negotiation

Read the article and watch the video on negotiation skills, then answer the
MindTools n.d., Win-win negotiation, MindTools, viewed 13 March 2017,
<http://www.mindtools.com/CommSkll/NegotiationSkills.htm>.
1. What is the aim of win-win negotiation?
3-2
2. Describe some negotiating styles mentioned in the article.

3. What are some of the steps recommended for successful negotiation?
3-2.40 CIVMB_LP_T3-2_v3
Part 7: Obtain customer agreement

This section discusses the need to obtain customer agreement and how to close the
sale.
18 Close the sale

Closing the sale by obtaining customer agreement follows naturally from handling
objections and addressing customer concerns.
18.1 Indications that the customer is ready to proceed

Customers often make buying signals, such as when they:
• agree with the points you have made
• become more forthcoming in their responses
• are upbeat and positive in their language
• ask specific questions
• seek clarification.
As the broker, you can assist this process by regularly checking the customer’s level of
understanding and comfort throughout the sale process.
18.2 Voice and language

In the closing stages of a sale, follow the tips below on using your voice:
• project your voice, but only to the level of the customer
• regularly pause to allow the buyer to digest what you have said
• match your pace to the customer — too slow may be boring, too fast and you may
lose them
• vary the tone in your voice to add interest or to highlight key points
• pause to breathe — do not sound rushed or frantic.
In the closing stages of a sale, follow the tips below on language:
3-2
• use clear and simple language — avoid jargon
• use powerful words
• use short sentences.
18.3 Closing questions

When moving to close the sale, keep it simple. Ask the customer a question such as:
• ‘From what you’ve told me, this home loan product seems like a good match with
your needs. Would you like to go ahead with that?’
• ‘It comes down to a choice between the fixed and variable loan. Which do you prefer?’
Be silent and wait for the customer to respond.

Apply your knowledge 14: Closing questions

Develop and practise some closing questions with which you
feel comfortable.
19 Obtain formal agreement

Obtain a formal agreement to proceed from the customer once concerns and issues are
worked through and implementation actions are discussed, clarified and agreed.
19.1 Update customer records

Update customer records in a clear and concise format in anticipation of preparing the
loan application. This is covered in ‘Topic 3-3: Packaging the application to send to
the lender’.
At this stage you may also:
• collect relevant information for loan processing
• collect support documentation for loan processing
• obtain signatures from relevant persons and officials
• obtain accounting information
• update bank information.
3-2.42 CIVMB_LP_T3-2_v3
Apply your knowledge 15: Contract law

Read the article below and answer the questions that follow.
Some contract law basics that every professional needs to know

As a practicing solicitor in a misspent youth, the principles of contract law
quickly become second nature. Whether drafting, interpreting or entering a
contract, you can forget that most people don’t read the terms and
conditions when installing iTunes!
Understanding some basics regarding contract law is important for every
professional, including brokers. Additionally, many of you will be
increasingly paid for services rendered, as opposed to a traditional
commission model. This means you will have to rely on a contract to detail
services rendered and fees payable.
Legal capacity
While it may seem obvious to some, ensuring you contract with the correct
legal entity is a critical first step. If the other party is a corporation, is the
individual you are dealing with authorised to bind the company? Are they a
director or officer of the company? Does their role in company, like CEO,
give you some comfort that they have authority to make corporate
decisions?
Are you entering an agreement with a trust? With the rise of SMSFs, you will
increasingly encounter trusts in your professional life. Do you know who can
execute contracts on behalf of the trust? This topic alone can occupy an
entire article — we’ll save it for a future edition.
Intention to create legal relations

This is another element of contract law which might sound obvious,
but often isn’t. Where you provide services to friends or family, especially in
a social or domestic setting, the law often presumes you did not intend to
create a binding legal agreement or understanding.
To rebut this presumption, you should always capture commercial
arrangements in writing where possible. By codifying a commercial
relationship you help support the view that you expected to form a legally
binding contract that can be enforced in court if necessary. 3-2
Offer and acceptance
In order to form a contract one party must make an offer that the other
party can accept. An offer needs to be more than an invitation to deal or
negotiate — you cannot have an agreement to agree. It must be a clear
promise to be bound should the other party accept the offer.
Acceptance refers to a statement or act which confirms that a party agrees
to an offer. The act of acceptance must be clear and positive — a failure to
act or respond cannot be deemed an act of acceptance (e.g. if you do not
return a new vacuum cleaner within 30 days you are not deemed to have
bought it!).

Consideration
The last major element of any contract is consideration. Even with a clear
offer and its acceptance, you cannot form a legally enforceable relationship
without consideration. In short, this is the price paid in exchange for goods
or services rendered. The ‘price’ can be anything from money to something
of value like reciprocal goods or services.
You may have heard the expression ‘the law doesn’t recognise gifts’.
This refers to a situation where goods or services are provided without
a reciprocal exchange of value. In this circumstance you have a
non-enforceable gift as opposed to a contract. Courts take a dim view of
gifts because, in the past, they have often been used to ‘save’ assets from a
liquidator during an insolvency event.
Final thoughts
Of course, where you are entering a material commercial arrangement
you should always seek independent legal advice. To heavily paraphrase,
a professional that relies upon themselves as their lawyer has a fool for
a client.
While contract law may seem unnecessarily technical or difficult to
understand, it provides a critical piece of infrastructure to all commercial
relationships which helps give parties confidence. As you become familiar
with the concepts, you’ll appreciate the importance of a good contract to
protect you livelihood.
(Spanos 2014)
1. When creating a contract, what is legal capacity?
3-2.44 CIVMB_LP_T3-2_v3
2. What does codifying a legal agreement mean? Why should you do it?
3. What is offer and acceptance?
4. What is consideration? Why is it required?
3-2

References
Meyer, SJ 2014, ‘Persuasion: fascinating study shows how to open a closed mind’,
Forbes, 12 June, viewed 13 March 2017,
<http://www.forbes.com/sites/stevemeyer/2014/06/12/persuasion-fascinating-study-
shows-how-to-open-a-closed-mind>.
MoneySmart n.d., Consumer credit regulation, Australian Securities and Investments
Commission, viewed 13 March 2017,
<https://www.moneysmart.gov.au/borrowing-and-credit/consumer-credit-regulation>.
Spanos, C 2014, ‘Some contract law basics that every professional needs to know’,
Australian Broker, September, issue 11.17, p. 15, viewed 13 March 2017,
<http://www.brokernews.com.au/contents/e-
magazine.aspx?id=191525&utm_source=ab&utm_medium=emag&utm_campaign=AB+i
ssue+11.17>.
Suggested answers
Apply your knowledge 1: Customer needs

Some questions to help determine a customer’s needs and requirements include:
• Could you tell me what about the interest rate is important to you?
• What is important about the home loan product or features?
• Is it important to you to pay off your loan quickly?
• Is it important to you to be able to fix the interest rate, providing you with peace of
mind knowing repayments will not change?
• Is it important to be able to make additional payments on the loan?
• Is it important to be able to use your savings to pay off the loan sooner?
• Is it important to be able to access additional funds paid into the loan?
• Is it important to be able to transfer the loan to an alternative property?
• Is it important to be able to top up the loan for additional funds for renovations?
• Is it important to be able to minimise your repayments?
3-2.46 CIVMB_LP_T3-2_v3
Apply your knowledge 2: Risk

1. Risk is the effect of uncertainty on objectives or, in the context of financial risk,
the probability that an actual return on an investment will be lower than the
expected return.
2. • Low-risk tolerance
These investors take a cautious and risk-averse approach to savings and
investments. They are willing to accept a lesser return for a more assured one and
are extremely unwilling to accept any loss. This may be because they do not have
time to recoup any loss or because they do not have a large amount to invest.
Their investment choices tend to be safe, such as keeping money in cash.
• Moderate risk tolerance
This category is for middle-of-the-road investors, who have a tendency to hold
a balanced or mixed portfolio of investments. They know they will lose money
if the markets go down but also expect to make profits if they go up.
Typically, these investors expect to achieve returns greater than taxes and
inflation and have a relatively relaxed approach to risk.
• High-risk tolerance
These investors want to substantially outperform the markets and are exposed to
substantial risk. They tend to be younger and have aggressive attitudes to risk and
profit. They know (or should know) they can lose a very high percentage of their
money if the markets go down, but also expect to profit greatly if they go up.
3. A person’s attitude to risk is subjective and likely to be influenced by recent events,
such as a financial loss. Levels of risk tolerance can be described on a scale or
determined using a risk attitude questionnaire.
4. No deposit home loans; loans relying on a guarantor; loans with long terms,
for example, 40-year terms; or using a home loan for gearing.
5. • Changes in monetary policy or interest rates have a direct impact on loan
repayments. Interest rate rises restrain inflationary booms, but result in increased
mortgage payments and a contraction in demand. Interest rate reductions
encourage growth.
• National and international changes to the economic cycle can result in
fluctuations in housing sector growth.
6. • Property location — a factor that cannot be changed about the property.
Perceptions of desirability are subject to change over time. A location may
become less or more desirable over time.
• Property management — all properties need to be managed and maintained to 3-2
retain their value and maximise capital growth.
Apply your knowledge 3: How much can a loan applicant

borrow?
This activity requires independent research, therefore no suggested answers are provided.

Apply your knowledge 4: Variable home loan products

Criteria that a borrower may use choosing a home loan product include:
• lowest interest rate
• lowest fees and charges, including fees over the life of the loan
• ease of application
• standards of customer service
• features such as redraw, offset account, credit cards
• ability to fix the interest rate
• maximum LVR with no LMI insurance
• maximum LVR with LMI insurance
• loan maximum or minimum amount
• areas for which the credit provider will lend.
Apply your knowledge 5: Review of client interaction

and NCCP Act
1. • personal loans
• credit cards
• overdrafts
• housing loans
• mortgages
• hire of goods
• guarantees
• continuing credit accounts.
2. • loans between friends and family members where the lender is not in the
business of lending money
• loans where no interest or other charges are applicable
• short-term loans of 62 days or less, but only where the fees and charges are less
than 5% of the amount of credit and the interest rate is less than 24%
• investment loans (other than to purchase residential real estate)
• margin loans (margin loans are regulated under the Corporations Act 2001 (Cth))
• credit provided without prior agreement (for example, a cheque account becomes
overdrawn without a previously arranged overdraft facility)
• loans provided by pawnbrokers and trustees of estates
• loans, including leases, to employees made under concessional terms
• bill facilities
• insurance premiums that are payable by instalments.
3. True.
3-2.48 CIVMB_LP_T3-2_v3
4. A court may also review a loan and can invalidate a loan agreement where it is found
to be an unjust transaction because of the borrower’s:
• age
• mental or physical condition
• lack of both understanding and access to independent advice
• having had unfair tactics used against them
• capacity to repay the loan
• understanding of the English language.
5. • Notification of changes and variations
Changes to a regulated loan must be specified in a notice sent to borrowers
as follows:
– change by agreement (other than principal increases)
– change by agreement (principal increases)
– unilateral changes (other than changes to interest rates).
The written consent of any guarantor should be obtained for any change to a
regulated loan.
• Changes to interest rates
Changes to interest rates will affect minimum repayment amounts. Lenders are
required to disclose interest rate changes in an advertisement in a newspaper
circulating throughout each state and territory. Borrowers must receive notice in
writing at least 20 days before the new repayment amount becomes effective.
• Statements of accounts
The NCCP Act requires statements of accounts to be provided:
– at least every six months for term loans and every 40 days for continuing
credit accounts (e.g. credit cards)
– within seven days of the borrower’s request if they are one-off statements.
A statement of account is not required if the interest rate on the loan is fixed for
the whole term of the loan.
• Statement of payout figure
The NCC requires that a statement of payout figure must be provided within
seven days of the borrower’s request.
3-2

6. • Application form
Lenders’ application forms must include:
– a declaration as to the purpose of credit and needs to be signed if the loan is to
be used predominantly for business or investment purposes, and therefore not
subject to the NCC
– joint borrower nomination — the NCC requires that correspondence be sent to
all borrowers. However, borrowers living at the same address may nominate
one of the borrowers to receive documents and correspondence by
completing the joint borrower nomination form.
• Ongoing mortgage information
All borrowers and guarantors, if applicable, must be issued with a loan contract
that sets out the terms and conditions of the loan.
• Repayments
The NCC requires that full details of loan repayments are clearly set out in the
loan documentation.
• Credit fees and charges
All credit fees and charges, including those that may apply in the future,
are required to appear in the contract.
• Amendments
A new contract is required to be printed for a change in:
– loan type or product
– regulated/unregulated status
– the loan amount
– borrowers
– primary security
– any collateral security, such as adding or deleting a guarantor.
Note: Minor correctional amendments, such as changes to the borrower’s name
or address, can be initialled by the borrower without a new contract being
prepared.
• Collections
The NCC makes provision for borrowers to apply for hardship relief.
Hardship relief is discussed in ‘Topic 3-3: Packaging the application to send to
the lender’.
• Enforcement
Before enforcing any mortgagee possession, the credit provider must provide a
written notice as specified by the NCC to the borrower.
• Debt recovery
Prior to taking any debt recovery action, such as taking possession of any
security property, the lender must provide notice in writing to the borrower.
3-2.50 CIVMB_LP_T3-2_v3
Apply your knowledge 6: Redraw

Apply your knowledge 7: Weekly or fortnightly payments

compared to monthly payments
Apply your knowledge 8: Case studies — recommending a

product
Apply your knowledge 9: Develop a sales presentation

Apply your knowledge 10: Tips for developing sales aids

Apply your knowledge 11: Identifying product documentation

to be provided to the customer
Apply your knowledge 12: Overcoming buyer resistance

3-2

Apply your knowledge 13: Negotiation

1. The aim of win-win negotiation is to find a solution that is acceptable to both parties,
and leaves both parties feeling that they have gained in some way.
2. • Where you do not expect to deal with people again and you do not need their
goodwill, then it may be appropriate to ‘play hardball’, seeking to win a
negotiation while the other person loses.
• Where there is a great deal at stake in a negotiation, then it may be appropriate
to prepare in detail and use legitimate gamesmanship to gain advantage.
• Win-win, where both parties feel positive about the negotiation when it is over,
enabling a good working relationships afterwards.
3. Preparation. Consider the following:
• What is your goal from the negotiation? What do you want to get out of
the negotiation?
• Think about what the other person wants.
• Consider what you are prepared to give away in the negotiation.
• What do you and the other person have that you can trade? What are you each
comfortable giving away?
• If you do not reach agreement with the other person, what alternatives do
you have?
• Does failure to reach an agreement exclude you from future opportunities?
• What alternatives does the other person have?
• What is the history of the relationship? Could or should this history impact
the negotiation?
• What outcome will people be expecting from this negotiation? What has the
outcome been in the past, and what precedents have been set?
• What are the consequences for you of winning or losing this negotiation?
What are the consequences for the other person?
• Who has what power in the relationship? Who controls resources? Who stands to
lose the most if agreement is not reached? What power does the other person
have to deliver what you hope for?
• What are the possible compromises?
Apply your knowledge 14: Closing questions

Apply your knowledge 15: Contract law

1. Ensure that you contract with the correct legal entity. For example, if dealing with a
company, you must create a contract with the person within that company that has
legal authority for the company.
2. Codifying a legal agreement means to capture the agreement in writing. You need to
codify a legal agreement to ensure it is legally enforceable.
3. To have a legal contract, one party must make an offer or clear promise and the
other party must accept the offer.
4. Consideration is the price paid for the goods or services rendered. It is a requirement
to form a legally binding contract.
3-2.52 CIVMB_LP_T3-2_v3

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The Lending Process

Topic 3-2: Developing and

Certificate IV in Finance and Mortgage Broking

Part 1: Stages of the loan process .................................................................... 3-2.4

1 The sales cycle ..................................................................................... 3-2.4

2 Stages of the loan cycle........................................................................ 3-2.5

Part 2: Review client needs ............................................................................. 3-2.6

3 Consider the customer’s needs ............................................................ 3-2.6

4 Risk profile .......................................................................................... 3-2.7

Part 3: Review home loan products ................................................................. 3-2.9

5 Research and gather additional information......................................... 3-2.9

6 Determining a loan product and product features ................................ 3-2.9

7 Home loan features ........................................................................... 3-2.17

8 Home loan services ............................................................................ 3-2.19

Part 4: Develop customer recommendations ................................................. 3-2.21

9 Loan structuring ................................................................................ 3-2.21

10 Determining recommendations ......................................................... 3-2.21

Part 5: Develop a customer presentation ....................................................... 3-2.25 3-2

12 Communication skills for sales presentations ..................................... 3-2.26

13 Preparing a sales presentation ........................................................... 3-2.27

Part 6: Assisting a customer to make a choice ................................................ 3-2.33

14 Meeting with a customer ................................................................... 3-2.33

15 Recommend a product....................................................................... 3-2.34

16 Overcoming buyer resistance ............................................................. 3-2.35

© Kaplan Education Pty Ltd 3-2.1

Part 7: Obtain customer agreement............................................................... 3-2.41

18 Close the sale .................................................................................... 3-2.41

19 Obtain formal agreement .................................................................. 3-2.42

References .................................................................................................... 3-2.46

Suggested answers........................................................................................ 3-2.46

Topic learning outcomes

© Kaplan Education Pty Ltd 3-2.3

Part 1: Stages of the loan process

1 The sales cycle

2 Stages of the loan cycle

Credit • receive application • credit provider

Post-credit • determine suitable collateral • credit provider

Pre-settlement • sign letter of offer and credit provider’s • borrower

Settlement • return all documents to the credit • borrower

Post-settlement • stamp mortgage documents • borrower

© Kaplan Education Pty Ltd 3-2.5

Part 2: Review client needs

3 Consider the customer’s needs

Apply your knowledge 1: Customer needs

Apply your knowledge 2: Risk

2. Briefly describe low, medium and high risk tolerance.

© Kaplan Education Pty Ltd 3-2.7

3. How can you determine a customer’s appetite or tolerance for risk?

4. Name some home loans products or features that may be

6. What are some examples of property risks?

Part 3: Review home loan products

5 Research and gather additional information

6 Determining a loan product and

6.1 Loan size

© Kaplan Education Pty Ltd 3-2.9

Example: 35% of gross annual salary

Apply your knowledge 3: How much can a loan

2. Joint applicants with three children and a combined gross income of

3. Joint applicants with a combined income of $300,000,

© Kaplan Education Pty Ltd 3-2.11

6.2 Determining the home loan product

Apply your knowledge 4: Variable home loan products

6.5 Fixed versus variable interest rates