Urgent commercial finance advice needed

[pulse]

I have a situation that I'll briefly explain. Buying a commercial property for 300K (property C). 240K is secured by two existing residential investment properties (properties A and B). 60K is a loan secured by the commercial property itself.

Rates as follows with CBA:
Property A : 6.57% (.75% discount) about 180K owing
Property B : 6.57% (.75% discount) about 210K owing

Property C :
240K ; 7.32% better business residentially secured (by A and B)
60K : 8.3% better business loan secured by property C

Initially I thought I would get the same rate on the residential part as I have on property A and B. The difference in cashflow is $209 per month instead of $359 as anticipated which makes the deal not as attractive.

I have asked for extra discount but I don't like my chances. What are the options? Should I refinance A and B at 6.57% or will that make tax too complicated. Is it unreasonable for me to expect them to match the rates on the existing loans? I know they have done it for a friend of mine on his latest investment purchanse.

Thanks In advance
Cheers
Pulse

 

[Rolf Latham]

Hiya

The 6.57 on the resi is a nice rate which is why they want to skin you with the 7.32 for the resi secured "business" loan.

If the average rate doesnt work for you, keep the commercial with them and move the others as required. You should be able to get an average effective rate of say or <or= 6.7 with a mix of basic loan and some loc/offset.

Once you let the CBA know that they should at least give you a basic resi rate of 6.81 on the new resi secured money, otherwise vote with your feet, and quickly - dont let em stuff you around.

Partly your challenge is having gone to the same bank for both deals.

Important question is what are the two resi places worth ?

ta
rolf

 

[pulse]

Thanks Rolf, the residential places are worth 340K and 470K which means the residential equity is on a 80% lend. I'll call them tomorrow and ask for a 0.5% discount on the standard variable rate (aiming for 6.81%). I like the idea of forming a long term relationship with the one lender but they seems to like the idea of screwing you for money.... I think the frindship is being strained

Any more advice appreciated

Cheers
Pulse

 

[Qlds007]

Commercial Finance

Pulse

I am with Rolf in suggesting to CBA that they might like to recuce their residential rate or you will walk however i think you also should be asking them about the Commercial rate.

8.3% is a terrible rate for a low LVR Commercial deal unless it is a specialised security.

 

[handyandy]

Hi Pulse

I have recently secured a substantial commercial loan with the CBA namely a 5 year fixed loan at 6.91%. The LVR is about the 70% mark.

The loan source is based around a 90 day bank bill which will mean some extra roll over fees (about $400pa). I organised a 3/2 split on the loan so this means that the rate is the same after 3 years if I want to continue with the loan, the cost for this feature is about .2%.

The security for this loan is a mixture of commercial (industrial unit) and residential units, one block strata'd and the other in one line. Because the units are in the same blocks and I hold more than 3 per block they are also regarded as commercial.

In these discussions they suggested variuos other option so they can do it but you need to ask.

Cheers

 

[malpass]

Hi Pulse,

Citibank Commercial have competative rates for commercial deals, you can ring Michael McParland and run the deal past him ph 02 82251369. Quite a knowledgable guy when it comes to commercial lending.

All the best

Malpass

 

[Medine]

Hi Pulse,

You could try mentioning the "B" word to CBA - Broker!! I've seen them react by offering a big discount!!

Cheers, Medine

 

[pulse]

Thanks for all the advice, Probably a bit late to walk away, valuations etc all done. I spoke to them again today, they will give me a one year fixed rate of 5.99% on the 240K residential, after that to negotiate new rate (good chance of 0.5% discount) so looking at 6.8% thereafter. I think I can cope with that.

The 8.3% commercial is high but the deal is cashflow positive by about $300 per month and all extra money will go to paying this off also, so the 60K will be paid off hopefully in 3-5 years.

My mate suggested giving the "big picture talk" - tell them how much they need you as a client.

Once again thanks for the advice

Cheers
Pulse