Big Day This Tuesday

We have business dealings with three banks.

We have a meeting with one of them this coming Tuesday. I didn’t feel comfortable having the meeting tomorrow, being April Fool’s Day .

They are sending one of their Relationship Manager - Professional and Executive Banking to meet with us at home.

Two main items on the agenda:

1. We have a $2.2M I/O loan whose fixed rate expires next weekend. There is still 2 years remaining on the loan term and we would like to fix it for another one or two years, mainly for cashflow planning reasons.

2. We have another $1M loan with another bank. It is split into two, with 20% P&I (Offset fully chocked) and 80% I/O (the I/O period expires in June). For simplicity reasons, we would like to move this loan over to the bank we are meeting with on Tuesday.

Given how tough banks are with financing at the moment, any tips on how we can “put our best foot forward” and achieve our aims?

 

Maybe you should postpone it until the RBA meets as some people do think there might be a drop next week ?

 

Markets have a rate drop at the next meeting at 4% probability. The ASX RBA Rate Indicator provides a market monitor for Official Cash Rate expectations in Australia based on potential RBA interest rate changes.

Market expectation is a rate drop to 1.25% around August 19 (give or take). https://www.asx.com.au/data/trt/ib_expectation_curve_graph.pdf

 

I agree with @d_walsh.

I don’t believe there will be a rate cut this month, one month before the Federal Election. I think people would view it as political interference.

Then I feel the RBA will wait a couple of months after the Election to see how things pan out. So, my thoughts a rate cut is possible, around August to November.

I did think I should wait until after the Federal Budget on Tuesday night. I decided not to as we won’t be locking anything in at Tuesday’s bank meeting. I will be requesting our bank to send us their proposal and to take into account anything that is applicable in the Budget.

 

I think they normally wait until things like employment numbers actually start to deteriorate .

 

Tips on the Mtg...

Is this bank the one that your income is credited to? Or does this banker have your payslips/tax returns etc already?

I

 

I have no useful tips unless sending them home with some home brew helps?

 

Depends a bit on the manager and how strong your position/servicing is. Do you know him/her already.

You may want to position it as an ‘all or nothing’ proposal.
Make sure that he/she feels that they have the opportunity to win an additional $1m in business - or lose $2.2m.
Don’t let them feel that the $2.2m is safe (even if it is). In this environment they may be happy to stick with the $2.2, without increasing their exposure unless they have to. Make them want that extra business.

Just my 2c

Blacky

 

... and not before a Federal Election, unless things are really dire.

At the moment, they aren’t.

 

Only our rental income and our SMSF pension we pay ourselves every July.

We are retired, so no payslips.

FY18 tax returns are still not completed by our accountant. We asked them to be completed by the end of February but haven’t even got draft versions yet. I know they are working on them as we have received an email early in March with a list of queries (which we answered in a few days).

 

No home brew here.

Do you suggest I drop in and pick up some from @Nodrog?

 

Oh damn. Got you mixed up - sorry! But you still have time to go get some

 

Never met the manager - only ever communicated via phone and email.

I believe our position is strong as we have been a customer for 30+ years. They are our main bank.

Our servicing is good and I can show how our cash reserves have been growing (in Offset accounts) and our available cash balance is growing over time.

Plus we are due for a 25% pay rise in a couple of years when our pension payments go from 4% to 5%.

It will definitely be an “all or nothing“ proposal. Our plan is to pay back the $2.2M loan in 12 months to 2 years. If they don’t take on the $1M new loan, we won’t have any significant loans with them and they will cease to be our main banker (another bank will be).

If we get to that situation, we might as well close down our other accounts and move all of that business to that bank. They will lose us as a customer of nearly 35 years.

 

I don’t know whether to take that as an insult or a compliment .

Geez, having their address would be handy .

 

Too precious to give to others. Go brew your own.

 

I was going to pay for it .

Missed opportunity to make some really big moolah, removing the reliance on dividend cheques this month .

Ah well, back to the good Shiraz then .

 

Even you wouldn’t have the money to afford my wife’s extraordinary brew.

 

I’m not sure it’s going to be a negotiation. It’s hard to use retirement income with most lenders. It is either shaded quite heavily or not used at all. I’d be wary of letting them know the plan is to repay the loan in 2 years. Home loans are a long term proposition. Banks don’t make any money the first 3 or 4 years.

Let us know how you get on.

 

I hope so as I always believe I am in the strongest negotiating position .

I understand where you are coming from but my thoughts are as follows:

We have been retired for 8+ years. By law, our SMSF must pay us 4% of its balance. Since we have retired, our SMSF balance has doubled. So, in reality, our pension payments have also doubled. And that is after tax. Our mandatory pension payments are twice what we need to fund our lifestyle.

And, as stated above, we are in for a 25% pay rise in next two years which is also mandated by law.

How many wage/salary earners can guarantee this amount of wage growth?

I believe we are a safer bet than most/all people whose main income comes from their employment.

Employees can be sacked, can be made redundant, their employer can go belly-up, ...

We have none of those risks. Our biggest risk is the balance of our SMSF could go down. But we have the next 3 years pension payments sitting in cash; so no risk there.

It will be interesting to see what the bank’s position on this will be.

Unfortunately we are on the wrong side of 60 and racing very quickly towards 65.

We have significant debt and I imagine we will be asked what our plan is to reduce our debt over the next 5 to 10 years.

I am a big fan of I/O with Offset accounts. One of the other banks forced us to go P&I, mainly as they wanted to see us start reducing our debt. The loan had a fully chocked Offset. So, by going P&I, they are reducing the loan and Offset in sync. So, it isn’t costing us anything in interest; they are just reducing our loan balance and our cash reserve equally every month. I want to “reward” them for this decision by taking all of our business away from them .

Will do.

 

Banker came down with the flu, on the return flight from her Fijian holiday .

Meeting has been re-scheuled to tomorrow week.

Bit of a bummer but at least we will know latest RBA decision (rates on hold), what is the Budget and the date for the Federal Election by then .

Also, more time for people to submit their tips .