Consolidating loans

Discussion in 'Property Finance' started by invest123, 17th Jun, 2015.

  1. invest123

    invest123 Member

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    Hi, I would appreciate some advice. At present I have 5 loans with 3 banks.
    I have 3 investment properties

    Bank A
    Loan 1: home (PPOR)
    Loan 2: Line of credit for investment property expenses
    Loan 3: Investment loan

    Bank B
    Loan 4: Investment loan

    Bank C
    Loan 5: Investment loan

    I was thinking about consolidating loans to one bank. Any pro?s and con?s.

    Thanks
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    You could, in theory, consolidate all your IP loans into one, however you'll still have to account for them in some way, through an excel spreadsheet etc.

    Pro's are you may get a cheaper rate.

    If you don't keep good records, can get tricky when selling or if you change the use of the properties down the track (if one becomes ppor for eg).

    You also need to consider the wisdom in giving so many assets to one lender - what happens if they spontaneously change policy/hike rates/or you come into financial difficulty?

    Having a bit of separation can buy you time should you ever need to start unwinding unexpectedly.
     
  3. Redom

    Redom Mortgage Broker

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    Heya, Jess provided some great advice on pro's and cons.

    Why are you looking to consolidate?

    It may be more difficult to do now too, you'd have to test the serviceability to see whether consolidation is possible.

    Cheers,
    Redom
     
  4. Terry_w

    Terry_w Member

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    The pros are
    1. more bargaining power = possibly cheaper rate (but could be higher with the recent changes!)
    2. Ease of dealing with 1 lender
    3. Extend all IO periods
    4. Extend loan terms

    Cons.
    1. If you are going down you will go down bigger and faster

    If you do consolidate I would take the opportunity to resturcture.
    Split the LOC and move the portion used for each property into the main IO loan for that property.

    Hopefully end up with a clean LOC which hasn't been used
     
  5. tobe

    tobe Mortgage Broker

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    There aren't too many pro's to consolidation in my opinion. Up until recently you might have gotten a better interest rate based on the combined loan size, and you have the convenience of dealing with only one lender.
     
  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker/strategist

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    I don't see any real reason to consolidate the stated structure at this point. Everything appears to be fairly need and everything has it's own purpose. Consolidating would likely introduce cross collateralisation which will only cause trouble in the future, without any benefit.
     
  7. invest123

    invest123 Member

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    thanks

    thank you for the feedback,much appreciated
     
  8. Rolf Latham

    Rolf Latham Member

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    The best analogy that I have heard ....................

    Convenience food

    if you eat burgers pizza and pies all week every week it will soon bite.

    Convenience in finance isnt that much different

    ta

    rolf
     
  9. invest123

    invest123 Member

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    thanks

    Thanks Rolf

    Does your quote mean I should consolidate or I shouldn't?

    One reason I was thinking about consolidating is I'm paying 3 x $400 "package fees a year"

    Your advice is appreciated
    Invest 123
     
  10. Jess Peletier

    Jess Peletier Mortgage Broker, Perth

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    Go chat to someone about the specifics - it might be worth moving one rather than all, especially if it changes your total LVR and therefore your rate.

    If they're all $200k loans it might be worth looking at.

    Or even just changing product with the same lenders - do you need 3 packages? Often you can ditch the package and just get an offset for $10/mth or similar.
     
  11. invest123

    invest123 Member

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    thanks

    Thanks Jess