Hi
I could do with some opinions please. I’m looking at refinancing two of our properties to Latrobe Financial. This would enable us to borrow enough to purchase again. This lender has been identified by our mortgage broker. We are currently with Commbank and ANZ and haven’t used a second tier non bank lender before so feeling a little nervous, wondering what the risks might be. The reason we are looking at this move is because with the current lending criteria, we don’t stack up with the big four banks to borrow again even though our rental income gives us good returns and our properties are at under 80% lending. Your feedback would be most appreciated.
Do you think that is a good idea?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Can you say more about why it mightn’t be?
I didn’t say it wasn’t a good idea, but you must consider things such as
. Are you over extending?
. Rates
. Fees
. Default
. Being stuck with same lender for years to comeEtc
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Brizziegirl,
Watch out that the new lender DOESN’T x-coll the two mortgages !! That is not a good situation to get into in most cases. Check with your MB about that.
BTW, for those reading who aren’t aware of “x-coll”, I’m referring to “cross-collateralising the properties on a single mortgage”. It can seem to be worthwhile in some aspects, but it can create other problems down-the-track – so do be sure you know what is happening when moving to the other lender.
Benny
Thanks Terry and Benny, both with good points to consider. As a lender do Latrobe have a history of stability? I’ve just never banked with someone other than CBA or ANZ so a little unsure. When you don’t know what you don’t know, if that makes sense.
Hi again,
As a lender do Latrobe have a history of stability?
I can’t comment as a customer of Latrobe, but maybe an early “Aha moment” from a seminar can help. The presenter was answering a similar question from the audience. The question went something like “How do I know that a lender isn’t going to go belly-up?” The presenter replied “Since you have their money (and not the other way around) it isn’t likely to affect you that much!” i.e. you haven’t lent them money, so you aren’t risking the loss of capital.
BUT, wait a minute!!!!!
There could be other problems that might stem from a bank failure e.g. they might want to liquidate by requesting you refinance your mortgage with someone else. Can they do that? I’m not sure, but I know that any mortgage you sign gives a LOT of power to the lender – e.g. that they can call on the mortgage to be paid up under certain circumstances !!
If such a request from them came through right when you were between jobs, or had temporarily lost one wage, could you cope with a refinance? Would you have enough borrowing capacity to be able to get another loan from another bank, especially if you are stretching to buy the extra IP in the first place?
Food for thought?
Benny
What would happen if they went belly up is that the debt would be assigned to someone else. Someone would buy their loan books and you would contine to repay as per normal to the assignee.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for that Terryw – probably little to worry about then if a lender goes belly up?
Benny
I think rams loans were bought out several years ago and the rates quickly increased. Many borrowers could not refinance and were stuck there and had to cop the rate rise.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks again everyone.
Interesting that they would be looking at Latrobe finanical. Do you have bad credit situation, ie something going on with your credit file?
Their borrowing capacity calculator is OKish but nowhere near the best and have significant costs – so I’d be curious how they fit the best.
Terry’s touched on some of the other considerations to make re; the lender.
Corey Batt | Precision Funding
http://www.precisionfunding.com.au
Email Me | Phone MeInvestment Focused Finance Strategist - servicing Australia-wide
As Corey stated a second opinion would be a good idea.
Latrobe are pretty hefty when it comes to fees and rates compared to other lenders.
Once you ascertain you have no other viable options will the expected ROI (return on investment) potentially out weight the costs and risk involved in refinancing and assuming a “cash out” component as well?
Colin Rice | CDR Finance
http://cdrfinance.com.au/
Email Me | Phone MePerth Based Mortgage Broker - Investment Property Finance Specialist | E: [email protected]
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