StGeorge Portfolio Loan

[Ranjit]

Hi everyone,
I am new to this so please be patient with me.

We currently have PPOR (loan 280K, P+I) and one IP(loan 240K, I only), Both properties are worth approx 400K each. I approached SGB to enquire as to setting up a loan structure to facilitate future IP purchases and I was suggested the SGB Portfolio Loan. This basically means can borrow up to 90% on PPOR and can create up to 10 flexible sub-accounts for investments or private loans (each separate for tax purposes), with offset account on PPOR.Apparently can access credit on each sub-account as equity builds up.

Has anyone used this loan structure ?
Any comments would be appreciated

Thanks
Ranjit

 

[urban cowboy]

Hi ranjit...

I have been using that exact structure up until recently - slightly different values though..

i have found it to be very easy to deal with - but you need to be able to keep track of costs and spending etc...if you're disciplined, it should work well...the mortgage brokers here might have some other suggestions for you - but i certainly am happy enough with it

 

[BV]

What they haven't told you is that each subaccount has monthly fees
I think it's $14/month so if you have many IP's and want to keep your IP loans separate it will cost you.
I suggest you talk to one of the resident mortage brokers
they could give you good advise and will help you structure your loan properly.
cheers

 

[Programmer]

What they haven't told you is that each subaccount has monthly fees
I think it's $14/month so if you have many IP's and want to keep your IP loans separate it will cost you.
I suggest you talk to one of the resident mortage brokers

Ditto. I find this ridiculous when I can do basically the same thing via WBC and also earn my MB a nice little commission! (separate loans to WBC). OK, the WBC isn't quite as flexible, but it's flexible enough. The 'Portfolio' type loans are a great idea (CBA has one too and there are probably others) but IMO their fees become silly.

 

[Peter_Tersteeg]

Hi Programmer,

I'm wondering why you think the St George portfolio is more flexible than the WBC premier advantage? I've found it to be a very flexible product, although it can be a little pricey when compared to others.

The biggest problem with portfolio loans (both St George and CBA, as well as others) is all the properties and all the loans are completely cross collateralised. They appear to be useful for a while, but these structures can create a real mess if you're not careful. I also agree that the St George account keeping fees are a bit of a rip off.

Many lenders have similar packages, which can work much better with appropriate planning. I have loans with St George, Westpac & CBA/Colonial. Each has been very useful for its own reasons. I've found the Westpac pro-pack to be the most flexible and I've stayed well clear of their umbrella products.

 

[Programmer]

I'm wondering why you think the St George portfolio is more flexible than the WBC premier advantage?

Hi PT, in the end the 'flexibility' I mentioned didn't rate high on my scale but for what its worth I think... there were two features I thought were nice;

a) Choice of a fixed or variable rates for each sub-account and;
b) that the ownership structure of the sub-accounts could be different.

However I also think the primary account (top controlling one) had to be in the name of the borrower? Further, the primary account must be variable.

That's where I got the idea of more flexibility from. I wonder, do you also pay for these 'extras'?

All that said, very happy with the WBC LOCS.

 

[wylie]

We tried to get into the St George Portfolio loan several years ago. We went through the application process and they decided that we were $1K short of income per annum for their eligibility guidelines. NO flexibility, no bending to get our business (we now have loans considerably over $1M). No taking into account 25 years of loans and not one missed repayment. Totally inflexible in my book.

We ended up going with a friend who is a loan broker and are on the Westpac package, several loans within the facility, some fixed some not. One annual fee that pretty much covers everything. St George can go whistle.

Wylie

 

[Ross]

Ranjit
Ive been using StG Portfolio loan for about a year now ( have a primary account with a LOC and two sub accounts for two IPs) ........setup process was a little painful/slow but its up and running now and going ok
From memory I paid an annual $200 fee up front and then there are no ongoing fees....can haver up to 10 sub accounts under this
Agreed with earlier comments that the one negative is that everything gets cross-collaterised but I can live iwth the for the time being.

Ross

 

[Ross]

Also forgot to mention that the primary account does not act as an offset to the sub accounts ....so any savings you may have will not work to reduce your overall interest expense on the subaccounts
So if you have considerable savings you may need to look at other options to get a good return on them

Ross

 

[Rolf Latham]

Hiya Ranjit

The biggest challenge we have found with the SGB product is the offset on the home loan isnt a 100 % IO offset. It doesnt reduce payments,it reduces principal.

Its a good product for a number of other reasons, the xcoll and be gotten around, but from a "general" credit point of view SGB isnt very flex in most ways, but then very much so in others.

All in all, like with all other products, there is no one boot fits all ..........

ta
rolf

 

[BV]

Ranjit
From memory I paid an annual $200 fee up front and then there are no ongoing fees....
Ross

Ross, I guess you meant to say that there are no fees
to the main account if you agree to have your salary paid directly into it ,
but the subaccounts do have monthly fees, check your statement pls.
Cheers

 

[Jase H]

I have to agree with Programmer re SGB Portfolio being too expensive.

I used to be under it several years ago, but I am happy to be out of it and under the ANZ Breakfree Package which is basically a mirror of the WBC product but slightly cheaper annual fee but only 80% without LMI instead of 85% with WBC.

Portfolio was $10 per month per sub when i was with them which i thought was steep but $14 is ridiculous.

Jase

 

[LLLP]

Are My Hands Tied ??

Hi ALL,

I also have a portfolio loan with St George and am in the process
of refinancing.

I also think cross-collaterising my loans can be a setback!

I mean, if I gain equity on my portfolio loans with STG can I utilise the gained equity to go to other lenders ??? OR

Are my hands tied because the loans are secured and cross collaterized with Stg?


SHOULD I,

untangle my loans web with Stg, as it is possible?

Will This allow me to go to other lenders?

There are cheaper LOC loan products out there?

I am happy to keep my Primary Account with StG?


Stg tells me not to worry as cross collaterizing allows me to
BUY and borrow more at 100 %? That I should worry about
untangling the web at a later stage!

Can Someone advise what would be the right path ?

 

[Programmer]

Can Someone advise what would be the right path ?

LLLP, send a PM to one of the MB's around these parts. They should be able to advise your current situation and see if they can make it better.

Cheers

 

[Ranjit]

Thanks everyone for your helpful comments.

If the Portfolio loan is selected alone, the sub-account admin fee of $14/mth can be avoided by paying an annual $200 fee to cover all sub-accounts.

However, the monthly admin fee of $14 for each sub-account can be waived if Portfolio Loan is selected under the "Advantage Package" rather than alone.
Things to note:
$0 loan admin fee for all sub-accounts
0.70% interest rate discount (on loan >$250K)
$0 estab fee
$0 setup fee
$0 change loan limit/restructure loan fee
$0 annual credit card fee
$0 100% interest offset

Seems a good deal to me.


Ranjit

 

[Rolf Latham]

Xcept the Interest only 100 % offset isnt IO

ta
rolf

 

[Peter_Tersteeg]

SHOULD I,

untangle my loans web with Stg, as it is possible?

Will This allow me to go to other lenders?

There are cheaper LOC loan products out there?

I am happy to keep my Primary Account with StG?

Stg tells me not to worry as cross collaterizing allows me to
BUY and borrow more at 100 %? That I should worry about
untangling the web at a later stage!

Can Someone advise what would be the right path ?

If you stay with Stg, you'll have an incredibly difficult time un-crossing your loans, as they're already set up and I just can't see them doing if for you simply because you ask them to. I've found the only truly effective way to do this is to go to a new lender. They've even told you not to worry about it.

Their advice to not worry about un-crossing is typical (and in my opinion, bad) advice from lenders. If you structure your borrowings correctly, you can still borrow 100% plus costs of a new property without LMI. Adding another property now simply makes you more dependant on a single lender (who WILL one day pull the plug on you). Getting rid of the cross-coll makes moving to another lender easier, which in turn gives you choice and flexibility.

There are loans available with cheaper rates. Some are not always considered a LOC, but they can work the same way or better.

 

[Jase H]

Thanks everyone for your helpful comments.

If the Portfolio loan is selected alone, the sub-account admin fee of $14/mth can be avoided by paying an annual $200 fee to cover all sub-accounts.

However, the monthly admin fee of $14 for each sub-account can be waived if Portfolio Loan is selected under the "Advantage Package" rather than alone.
Things to note:
$0 loan admin fee for all sub-accounts
0.70% interest rate discount (on loan >$250K)
$0 estab fee
$0 setup fee
$0 change loan limit/restructure loan fee
$0 annual credit card fee
$0 100% interest offset

Seems a good deal to me.


Ranjit

Yeah that seems a lot better than $14 per month per account! Does the $200 pa also include valuations or do you have to pay extra for these?


Jase

 

[Ranjit]

I am confused about the cross collateralisation issue.
Can someone explain this to me?
If i had a PPOR and say 5 IP's under the SGB Portfolio,
couldnt i sell a property at any given time or,
due to this x-collat am i restricted in some way?
I would have thought that one should be able to buy and sell properties under the Portfolio without restriction, otherwise how could one do a simple thing like sell and buy a new PPOR??

 

[Peter_Tersteeg]

Ten disadvantages of Cross-Collateralising your property portfolio…

#1. When you sell a property in a cross-collateralised structure you may not see any of the funds as the bank may request some or all of it to go back in against the existing loans to strengthen their position. They don’t need your permission either. Picture this you’re releasing one of your properties for an opportunity or worse still a bind, and the bank deducts funds to strengthen their position. Where would that leave you? I have seen this happen to some very asset strong and successful property investors. Answer given, Bank Policy!

#2. When you sell a property you have to resign all of the existing mortgages. Extra unnecessary paperwork.

#3. You can loose product selection and control by being with just the one bank. For example the bank can say no more interest only loans for you, we want you to take a Principle and Interest loan from now on, to reduce your debt with us. This is quite common when your borrowing levels get up with the one funder.

#4. Bank holds far more security than often necessary, for example Property A worth $800 000 is used to buy property B for $250000. The bank has $1 050 000 of assets against $250k of loans. The result is that the bank holds all of your cards.

#5. Buying across state boarders you are subject to mortgage document stamp duty of that state, this in itself is OK, but when you have other properties as security for the purchase, regardless of the state they are in you may have to pay the mortgage document stamp duty on the entire loan amount, rather than just on your purchase price. For example, purchase property A worth $300,000 in QLD but for whatever reason you have offered another property as security and it is worth $500,000 in the ACT, you would have to pay mortgage document stamp duty on the whole portfolio of $800,000 and this is because the entire mortgage document has to be stamped in QLD. This duty is a state duty and is different in every state or territory. An example of the difference in the amount payable can be, where the stamp duty is $4 in a thousand, for the cross-collateralised mortgage document stamp duty you are up for approximately $3,200, but if you had your purchase as a ‘stand alone’ loan you will have to pay approximately $1,200 . If you need to find out more about this point, please give us a call.

#6. Having at least two lenders gives you the flexibility of playing one off against the other, giving you more choice an ultimately more control.

#7. If you want to realise some increased equity when properties have grown in value you need to have your whole portfolio revalued (multiple valuations instead of one, again an additional and unnecessary cost).

#8. You can run out of borrowing capacity with one lender when you reach their maximum serviceability / exposure levels.

#9. It is so much harder to move banks, if you no longer like or agree with their service or lack of.

#10. If you have cashflow problems, your whole portfolio is at risk. Better risk management from your respect is to not cross.