All loans with one lender?

My broker advised me to keep all of my loans with one lender as they apparently calculate serviceability at a lower rate.

Theory I've read is to split loans across lenders so to diversify my lender concentration risk and also improve serviceability.

Is it true that keeping all loans with one lender improves serviceability, particularly where i have fixed rate loans?

 

Hi there

Benefits generally include having one annual fee and an ability to negotiate decent rates due to aggregate borrowings.

I wouldn’t say it improves servicing - happy to be corrected though.

To improve servicing you normally have to use more than one lender.

Cheers

Jamie

 

It could give you a larger discount which could help servicing.
And, if with certain lenders, such as CBA, it can help

 

I thought they’d just continue to use their 7.25 assessment rate regardless of discount.

The larger discount can also reduce negative gearing add backs.

Cheers

Jamie

 

What data are you after?
5 loans - 4 fixed IO for IPs, 1 PPOR variable P&I

 

I believe CBA add on a margin on other lender debt - it is built into the calculator.

 

It may be true but also may not. Such a question depends on many variables. Many more than just the number of loans you have.

On a side note, is squeezing more money out of a lender more important that the fact that they will holding your basket of eggs?

 

I have quite a few loans with 2 majors and 3 second tier institutes. My SMSF and business finances are with a 3rd and a 4th major. With my mortgage broker's advice, I always go with the provider that is best for my situation at the time that I want to borrow. I never had any issues using multiple lenders AND to be honest I NEVER felt that if I went with a single provider, they would treat me any better.

I also often wondered why they didn't proactively approach me (or my mortgage broker) to see if they can lure more of my loans over given they all knew what I have, where and what I was paying. That's what I would have done if it was my business.

 

They do, 20% to actual repayments for OFI debt. 7.25% sensitised rate for new debt.
You can get a higher total borrowing capacity keeping part of your debt with other banks in cba’s case.

For example Anz don’t load actual repayments. If you hold other debt their calculator makes you input total debt and term remaining, then calculates a sentitised repayment based on 7.25 or higher, just as if you were bringing the whole lot across.

 

Hasn't been 20% for a while, it's 30% of OFI repayments @ P&I.
So the thought to keep existing debt with OFI is somewhat removed.

 

To go back to the original question, I don't believe putting all your loans with a single lender will increase your serviceability (granted I can think of a possible exception or two, if a lot of things line up really well, but that's extremely rare...).

Almost universally lenders assess existing loans at 7.25% or higher, over the P&I term of the loan. That gives us a benchmark which is fairly awful.

As already outlined, a few lenders such as the CBA will look at other lenders debt at actual rates, plus a 30% margin. If things line up well, this might give a modest advantage if taking a future loan with the CBA. It's extremely rare that this is a disadvantage. The problem here is that this only applies to other lenders debt, the CBA assesses their own debt at 7.25% (or higher) just like every other lender.

This debunks the premise that all debt with one lender results in better servicing. If you have all your debt with the CBA, they assess the new debt and the existing debt all at 7.25% just like ever other lender. It's only when you've got your loans spread around different lenders that you might get an advantage.

Often the main advantage of all loans with a single lender is a slight advantage in negotiating rates; sometimes. This is actually a disadvantage for servicing because most lender use the actual rate to calculate the negative gearing ad-back, but the assessment rate for the liability. The paradox of lending is that cheaper rates usually means less serviceability.

Bottom line is that in most cases, putting everything with a single lender generally doesn't grant any advantage for servicing and in a few rare cases will actually reduce your servicing. You can get a slight servicing benefit by strategically choosing different lenders at the right time, but realistically this advantage is fairly small with mainstream lenders. Even with the non-conforming lenders the margins are reducing.

 

Makes sense. To be honest, I always thought of the poor person working at a bank, asked to make million dollar decisions... Why go through that effort and risk? This is why - as soon as things start to get a bit more complex than 1 or 2 loans - we absolutely need you guys (mortgage brokers) to pull it all together... cheers

 

If you've got everything with CBA they assess there own debt at 7.25, so no advantage there. If you have everything elsewhere and get a great discount there, servicing can be improved by then going to CBA. But even then with the loading there's not a huge advantage I've found.

 

Poor banker, must be tough

 

In some cases moving all the debt to the one bank might seem advantageous. Restarting new 30 year loans as opposed to inputting the higher repayments on the old OFI loans with a shorter remaining term will seem like an advantage.

 

A 30% margin on servicing of OFI debt sounds huge! Or am i missing something? So if I had a $500k loan with CBA and $1.5M with OFI's and I went for another $500k with CBA, they will calculate servicing of my OFI debt as 30% more of 7.25% = 9.425%? Am I calculating this correctly?