All Topics / Finance / loans from the same bank – what's the pros and cons

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  • Profile photo of siewlinsiewlin
    Join Date: 2012
    Post Count: 19

    Hi ,
    May i know what’s the pros and cons of having my residential and one investment mortgage from the same bank?Apparently , the XX bank claims that they will give me a better interest rates if i were to both loans from them . PLEASE GIVE ME SOME ADVICE.

    Profile photo of Corey BattCorey Batt
    Join Date: 2012
    Post Count: 1,010

    Having more than one loan with the same lender isn’t necessarily an issue and can indeed give cost benefits of scale in being able to negotiate rates lower. This still does need to be done from the perspective of focussing on your long term borrowing potential however – as centralising all of your lending to one bank is a fast way to run out of borrowing capacity and lock out your ability to access equity. Using multiple lenders as you grow your portfolio can allow you to extend your capacity through leveraging the policy of each lender to you advantage, I actually wrote an article about this recently:

    I’d suggest having a chat with an investment focussed mortgage broker than directly with a bank – as they will be able to look at the greater picture for you and give you the best loan options available in the whole loan market, instead of just what the one lender provides.

    Corey Batt | Precision Funding
    Email Me | Phone Me

    Investment Focused Finance Strategist - servicing Australia-wide

    Profile photo of BennyBenny
    Join Date: 2002
    Post Count: 1,416

    Hi Siewlin,

    As Corey said, having both loans with the same lender doesn’t HAVE to be a problem, but you need to be more sure of several things that COULD become an issue.

    First, if you were to run into trouble, and, having paid little off the IP and lots off your PPOR (your home), this means there is lots of equity available in your PPOR, and not much in the IP. So, what would stop the bank taking your home to pay off the debt, leaving you with the IP? Food for thought….

    Another (related to above) possible issue is the situation know as x-coll (cross collateralisation). Have a read here to get a good idea of what x-coll is, and how it can be a pain to you:-

    Note that the above two possible concerns can not take place if you have borrowed with separate lenders.

    Like Corey, I too would suggest getting to know a good Mortgage Broker. Corey is one of several on this board – check people’s signatures to see their professions. A MB will have access to SEVERAL lenders, and have a great working knowledge of “which lender first”, “which lender is best for certain situations”, “which lender has the most relaxed lending parameters”, etc. etc. Their worth is almost immeasurable – and they are paid by the lender, not by you – go find one to work with you, and gain a super important member of your team.


    Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    Generally it is not a problem and can result in some good rates, but there is a risk.

    Most loan agreements have ‘all moneys’ clauses which mean that any security you have with the bank will be used to secure all debts you owe to that bank, whether now or in the future.

    So if you get into trouble you may come down quicker than if you had your loans with different lenders.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide)

    Profile photo of Colin RiceColin Rice
    Join Date: 2011
    Post Count: 338

    Just keep them stand alone and not cross collaterlised. Unless you have specifically told the lending officer at the bank or broker chances are it may be.

    Best way to check is to look at the loan contract under the SECURITIES heading (usually a few pages in) and if you have more than one property listed its cross collaterlised and needs to be uncrossed.

    Get an IP savvy broker to check if not sure and also to restructure and clean it up.

    Colin Rice | CDR Finance
    Email Me | Phone Me

    Perth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]

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