If you have, or plan to use, several properties as security for one or several loans then there are some very good reasons to consider using different lenders.
Blogger: Tony Spies, mangaing director, Vital Wealth Group
1. If the one bank is holding several propertries as security for one or several loans then they are also controlling access to equity in all those properties. This may apply even if the properties are not cross securitised. It’s in the fine print that very few people read on your loan contract.
2. By maintaining securities with different lenders you can cherry pick which property you select if wanting to release equity for personal or investment use. If all loans are with the one bank they may choose to value all properties. In this case you may find that one or properties may have declined in value offsetting gains in other properties leaving you unable to draw equity.
3. If you want to borrow more than 80% of one investment property and loans are cross-securitised, the mortgage insurer will charge a mortgage insurance premium on all your lending, not just the new loan. The additional mortgage insurance cost could be significantly higher by thousands of dollars.
4. Different lenders have different lending policies. This may enable you to increase your borrowing to a level otherwise not attainable if all lending with the one bank. For example Lenders can vary how much they will lend basaed on location and style of security. Lenders can also vary with percentage of rent used in calculating servicing impacting how much they are prepared to lend.
5. Increases your lending flexibility. Not surprisingly lenders are more likely to lend to a client that is an existing client. Splitting your lending can give you more options in the future if lending gets tight.
There may be some downside to spreading your lending mostly related to costs. For example you may be missing out on loan volumen discounts that you may have been eligible for if all loans were with one bank. You might also incur some additional account keeping fees. In my experience, a good mortgage broker can usually find a way of minimising costs while still utilising different lenders and having the associated benefits.
About Tony Spies
Tony Spies specialises in helping source finance for your home or investment property including for SMSF.
He has over 12 years finance experience and 10 years with the Loan Market Group in addition to 20 years experience in property investment. Tony is a property investor himself and his experience in this area of finance and utilising strategies to repay debt can save his clients thousands.
Mr Spies has:
* Settled over $150,000,000 of loans
* Diploma Finacial Services (Finance/Mortgage Broking)
* Diploma Financial Services( Financial Planning)
* Self Managed Superannuation Funds Course
* Property Investors Association Accreditation Course
* Full Real Estate Licence