Loans assessed on a ''portfolio basis''

Hi there,

Is there any advantage in having your loans assessed by one lender on a "portfolio basis" with respect to interest rates and LVR's, but with individual loans being kept separate... versus formally cross-collaterilising them?

Thanks.
 
JIT, not sure if you're asking only about crossing v maintain separate securities or whether you're also asking about advantage of keeping all properties with one lender.
With regard to the first I'm pretty sure you know what the consensus is. Cross collateralising will give the bank more power to look at your whole portfolio etc so don't do it if you don't have to.
With regard to the second, you'll be in a better position to negotiate a better discount off SVR but greater % exposure with one bank = greater risk.

Hmm... Just re-read your q & I think you are asking only about the former. If crossed and you get into trouble or the bank wants to limit exposure, the bank can sell whatever property it likes, not the one you happen to be behind in. In this scenario the potential downside is greater than separate properties. Also limits your flexibility maybe if you want to sell one property & all thye securities are bundled as one. I wouldn't be surprised if you read the 'portfolio' docs whether it may not function as a cross-collaterised obligation anyway through the function of an "all monies" clause but that's just speculation on my part. I'm sure the brokers can give you a much better answer.
 
I have all mine with St George so far. 2 cross coll- the rest separate loans. The last 3 I just went in and said "I'm buying this" I deal with the same lady. She types the details into the computer says" I'll have the paperwork ready in 3 days. I sign that's it. Easy. I have a low LVR which helps.

I'm looking elsewhere now though as I don't want too much with the one bank. It's just been too easy to just go back top them though. Rates are good too. New bank = set up fees and no discount due to only 1 loan.
 
Some lenders don't change application fees, however some fee's are a cost of business, whether that business be rental properties or any other type of business.

I am not saying that we should rejoice in paying fees, or that we want to pay more than we have to, but I would not worry about paying some fee's as long as the outcome worked for me.

These are just my thoughts, I would look at the mountain that I wish to climb, and not the small hill that is in front of me.

Paying some one-off fees to get the structure that will work for me now as well is in the future is a small price to pay.

Have a great day.
 
JIT, not sure if you're asking only about crossing v maintain separate securities or whether you're also asking about advantage of keeping all properties with one lender.
With regard to the first I'm pretty sure you know what the consensus is. Cross collateralising will give the bank more power to look at your whole portfolio etc so don't do it if you don't have to.
With regard to the second, you'll be in a better position to negotiate a better discount off SVR but greater % exposure with one bank = greater risk.

Hmm... Just re-read your q & I think you are asking only about the former. If crossed and you get into trouble or the bank wants to limit exposure, the bank can sell whatever property it likes, not the one you happen to be behind in. In this scenario the potential downside is greater than separate properties. Also limits your flexibility maybe if you want to sell one property & all thye securities are bundled as one. I wouldn't be surprised if you read the 'portfolio' docs whether it may not function as a cross-collaterised obligation anyway through the function of an "all monies" clause but that's just speculation on my part. I'm sure the brokers can give you a much better answer.

Ms Jade,

Actually the plan here was to have all loans with one lender in order to get the maximum rate discount, and then a further rate discount based on the overall portfolio LVR being <80%, for this particular lender.

But... by doing this without formally x-colling the portfolio, and assessing the overall interest rate applied according to the overall portfolio LVR.

Hence... the loans are assessed on a ''portfolio basis'' so to speak.

Each loan would still be secured by one property, with no ''bundling'' of loans and securities.

I'm sure there's an all monies clause (and some other clause) in there which would let the bank do whatever it wants if it needs to, regardless.

Also, I think that when looking to retire (off property investments for example) off an arbitrage on net rent and interest expense, then getting the lowest interest rate possible is critical... it's clearly your biggest expense.

eg. 3% net on $2M = 60kpa +ve CF, vs. 2% net on $2M = $40k +ve CF, so maybe the difference between being fully retired on a modest income, vs. being semi-retired on a lesser income.

If the bank is not playing ball for some reason, then you take the whole lot to another lender in one go (or at least threaten to)...
 
Hi JIT

Dont .............?

Once u become totally rental dependent, to then make your strategy dependent on the GRACE of ONE lender, with the parachute being to move to another once u are "on the nose" would seem risky ?

ta
rolf
 
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