Do 1st Tier Lenders Make a Difference?

Hi

I have recently come across a mortgage broker who is helping me with a highly geared strategy. He is preaching that it is important to use 1st tier lenders initially and then once the big banks won't touch you then you can move to the people that deal with higher risk lending. He is specifically recommending commbank which I know pays the most commission to their brokers and that is why I got suspicious.

Is this guy gunning for the commission or is this how the banks work?

 

Combank generally dont pay the higest commississions in my experience but the 1st tier banks is where i like to start.

 

The difference in commission is negligible.

 

Cba can make for a great foundation lender when setting up a loan structure for property investors - they have a good cashout policy, will lend against desktop vals and have decent pricing.

I wouldn't necessarily say that you have to go with a mainstream lender first up - it all depends on the individuals circumstances.

The comms difference is almost nothing.

Cheers

Jamie

 

I also like Commbank early on - they have excellent policy for investors. I also tend to agree, in most cases, to look at using the big guys for the foundation properties - they are just heaps more flexible when it comes to doing things to existing loans once you have a few properties under your belt.

 

ask your broker for a commission comparison if you are worried. There are loads of lenders that pay better than CBA.

 

Yes they do make a difference - here's why:

• When building a portfolio, the ability to access equity is usually important to move forward. Accessing equity includes consideration of a lenders valuation policies, serviceability, equity release policies and general consistency of bank policies.
• You can also split loans, access additional equity via a seamless top up process, etc. Pricing is also very good.
• CBA are one of the best in this space. They allow desktop valuations which are generally quite strong, unlimited cash outs at 80% LVR, have a decent calculator that doesn't punish CBA debt any more than another lenders debt, and have a rolls royce bank policy that generally is very flexible to changing circumstances (with a few notable negatives, like their limited underwriting authority for LMI loans).

Your broker's probably onto something, but its probably worth building that relationship with them, so you can trust their advice better.

Usually i find it's also worth testing why your broker suggests CBA (as well as PC members). Commissions is rarely the reason for differentiated advice.

 

I dont have any direct tier 1 loans but most of mine are funded by a tier 1 owned lender (eg RAMS, Choicelend etc).

 

CBA is by far the most effective lender for a broad range of scenarios as an initial lender to build a portfolio with. They're also not the 'highest paying' - but rather middle of the pack (depending on what structure they're on, the highest commission plan is 0.65% of loan amount, whereas the industry floats between 0.6-0.7% excluding a few outliers on both ends of the spectrum.

There's some genuine strong reason to use certain lenders at the right time - it's not so much about using Big 4/1st tier lenders first, but using lenders which have the right policies for those looking to build a portfolio - something CBA excels at. As you build your portfolio you'll then have to diversify into using other lenders to expand your long term borrowing capacity.

 

Watch this space

 

I'd suggest that the CBA pay average or slightly below average commissions. For me personally I seem to have a higher workload for CBA deals than many other lenders.

They are however a good balance of flexible policy and decent serviceability for borrowers. They are well balanced to make them a decent lender to start out with.

There are others that are significantly more generous that are best left for later diversification, but the CBA work well enough that you're unlikely to maneuver yourself into a corner by using them early.

 

If you are only buying one property and trying to pay down home loan asap, it doesn't really make much difference which lender you are going to.

In term of CBA, as above mentioned, CBA can be a good starting place, if you want to build a property portfolio.

If you are not comfortable with your broker, you better find another one who you can comfortably work with. In building up a property portfolio, you need a broker you can work with. not the one you worry about his/her commission or something.....etc.. ( all the banks are paying similar amount of commission anyway)

Build a good relationship with your broker, it will make your property investing journey much smoother.

 

Using lenders in a planned progressive way seems to be the consensus.

 

Bingo. You maximise your portfolio growth potential by strategically using specific lenders at the right time - which is usually at odds of most Australian's perception that you choose loans by the cheapest interest rate.

 

Thanks for the feedback, it obviously isn't making a difference to the brokers decision. It is just one of those things I read that put doubt in my mind. It is good to know the reasons for the recommendation.

 

CBA - Every brokers 7 iron.