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Borrowing from different banks

Discussion in 'Property Finance' started by Roshy, 21st Oct, 2015.

  1. Roshy

    Roshy Member

    Joined:
    12th Jul, 2015
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    22
    Location:
    Victoria
    Hi everyone

    I am planning to borrow for my 2nd property.

    There were a few threads on PC saying that you could borrow more money if you have your loans across different banks, rather than having everything with one bank.

    Why is this?

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    18th Jun, 2015
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    Location:
    Sydney
    Different banks have different policies.
     
  3. Redom

    Redom Mortgage Broker Business Member

    Joined:
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    Location:
    Sydney (West) and Canberra
    Lenders work out your borrowing capacity by examining your income less your 'assessed' expenses. Whatevers left over determines how much banks are willing to lend to you. They call this the 'net monthly surplus' number.

    One of the bigger differences between banks policies is the calculation of your 'assessed expense' - or more specifically, the calculation of the expense for all your mortgage debt.

    If you pay $50,000 a year to your mortgage, some major lenders will use an assessed expense somewhere around the 90-100k mark, while others will use somewhere around 65k. In most cases, the lender your already banking with, they'll use the higher end of this scale (near double your actual repayment). In contrast, another lender will use an assessed repayment thats significantly less.

    Therefore with the new lender, your borrowing power is significantly higher as your assessed expense is lower and your net monthly surplus is therefore higher.

    Using this concept, you can map out some basic structuring to your portfolio and utilise this difference to extend your maximum portfolio value that banks are willing to support.

    Cheers,
    Redom
     
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Location:
    Gold Coast
    Borrowing capacity aside, prudent risk management means managing concentration risk

    ta
    rolf
     
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  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    The short answer is that most banks assess borrowing capacity differently. Having said that - this is changing. With recent pressure from APRA - a lot of lenders have moved towards a similar method of calculating max borrowing.

    You may not necessarily have to go to a different bank for your second property - it all comes down to your individual circumstances/strategy. There can be benefits of having multiple loans with the one lender (within reason) - and you can still avoid cross collaterisation.

    Cheers

    Jamie
     
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  6. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Location:
    Perth WA
    I agree with Jamie - with only 2 properties in the equation there can be benefits to using one lender, like lower interest rates particularly if they are low value properties.

    When your portfolio is larger it becomes a risk management thing.
     
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