Borrowing from different banks

Discussion in 'Loans & Mortgage Brokers' started by Roshy, 21st Oct, 2015.

Join Australia's most dynamic and respected property investment community
  1. Roshy

    Roshy Active Member

    Joined:
    12th Jul, 2015
    Posts:
    34
    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 Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,673
    Location:
    Australia wide
    Different banks have different policies.
     
  3. Redom

    Redom Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    4,607
    Location:
    Sydney (Australia Wide)
    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
     
    TaylorChang and Gaby like this.
  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    10,599
    Location:
    Gold Coast (Australia Wide)
    Borrowing capacity aside, prudent risk management means managing concentration risk

    ta
    rolf
     
    Propertunity likes this.
  5. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

    Joined:
    18th Jun, 2015
    Posts:
    3,977
    Location:
    Canberra, Brisbane and Sunshine Coast
    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
     
    TaylorChang and Jess Peletier like this.
  6. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

    Joined:
    18th Jun, 2015
    Posts:
    6,673
    Location:
    Perth WA + Buderim Qld
    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.
     
    TaylorChang likes this.

Our clients are global and know we are property tax professionals. Our advisers are qualified and experienced and we don't outsource. We can help with complex CGT, Income Tax, and Developer issues. Property is our speciality incl Trusts, Co and SMSF