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IP Loan Consolidation

Discussion in 'Property Finance' started by Robbo03, 31st Jul, 2016.

  1. Robbo03

    Robbo03 Well-Known Member

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    Hobart
    I have 4 property related loans, as outlined below. Is it possible to consolidate all IP related loans into one at one bank without cross collateralizing? Provided the product meets our overall needs and strategy this would really simplify things and I assume this could provide significant interest rate negotiating power?

    Loans:
    PPR - CBA
    IP 1 - Equity loan CBA
    IP 1 - Adelaide Bank
    IP 2 - ANZ

    Thanks in advance.
     
  2. Redom

    Redom Mortgage Broker Business Member

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    You could consolidate lenders but you would need to have each individual loan secured by one individual property. That means having 4 separate loans.

    Your ability to have it all with one lender may be dependent on borrowing capacity. You'll find it's much harder to have all your debts with one lender relative to having it split across multiple banks.

    You'll need to consider concentration risk too if the overall loan size is large.

    Benefits: Less fees, simplicity, cost.
    Cons: concentration risk, hassle of moving.
    Can it be done: Depends on valuations/LVR & borrowing capacity.
     
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  3. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    You may be able to if you have enough equity in one property, but it's a bad idea from a tax perspective. You can put them all with one lender though, which can allow a better interest rate.

    Again, not always necessarily a good idea especially if the loan amounts are significant.
     
    Last edited: 1st Aug, 2016
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  4. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    A Core question is how did the spread come about in the first place ?

    Id suggest its not a serviceability reason in yuur case but some other reason,perhaps rate or valuation at the time.

    its a common request for our mature in cycle borrowers that have 2 to x properties........ why cant we just use one bank ? we dont like all the paper work/fees.

    Typically servicing, more usually common sense around concentration risk and sometimes LMI issues

    Amalgamation usually has more down than upside

    Its simple, but not obvious

    ta

    rolf
     
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  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes it is possible.

    If you have one big loan it will be a disaster from a tax pov, and also from a risk point of view.

    You can keep all loans separate and each loan secured by one property and all with the one bank - so they are not cross collateralised. but it is likely that each property will secure all debts to that lender because of the all monies clause in the contract with the bank.

    If your risk of default is low and your understand the risks the benefits of extra deductions may tempt you more than the negatives.
     
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  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Yes - as long as you can demonstrate serviceability and meet the policy requirements with the one lender

    Might be a sub-optimal structure if you're planning on purchasing more though - could also be an awesome way to cut costs (it's hard to say without knowing your longer term plans).

    Cheers

    Jamie
     
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  7. tobe

    tobe Well-Known Member

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    The discounts for larger loans are rarely significant enough to justify consolidation. Try getting some pricing first and see if it's still worth the bother.
     
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  8. Kuna_Learner

    Kuna_Learner Member

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    Thanks to OP for the great question. I learn so much every day by reading 'em. :) One small query, if each loan is secured by each property in the above case with same bank. So if you had to sell one property to use it for future Investment use, will not the bank ask to pay off debt on one of the remaining loans ? I thought that was similar to cross collaterising! Am I missing something ? Probably am!
     
  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    If property A is only securing Loan A, and Prop B is only securing Loan B, this will not be the case in most circumstances.

    If you've defaulted on the loan/s, they do have an all monies clause that lets them sell to recover debt.

    In an x-col scenario, the bank can reduce any and all debt as they please with sale funds - this is not the case when loans aren't crossed.

    For eg, a friend of mine had a serviced apartment x-col with a house - when she sold, the bank paid of the apartment completely with the sale funds. This would not have happened if they'd be secured individually.
     
  10. Threebythree

    Threebythree Member

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    If you haven't crossed the loan and its all within the one bank (ie. CBA) and you got a better interest rate. Isn't that a win all round? Why still leave them in seperate bank accounts?

    Where you needed a next IP, can go back to one of those providers who are more generous on serviceability?
     
  11. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Because you may re-shuffle all of your lending to Lender A, but when it comes to draw equity for the 5th property Lender A may not allow you to release any funds - checkmate.

    It all does come to the specific figures and greater strategy, keep a level of lender spread between the right lenders can balance cost savings vs capability to continue growing the portfolio. Where possible though it is certainly ideal to have a level of consolidation within certain lenders to reduce excessive fee duplication and maximise discounting of rates.
     
  12. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    Convenience v concentration risk

    One is less known, the other is obvious

    ta

    rolf