I hear about the traps that there is an imaginary ceiling of $1mill for lenders after which they get nervous about lending more.
Is that true?
If so, why? Shouldn't each property stand on its own merits no matter how many you have?
It's more to do with the banks perceived risk.
The amounts seem to vary between institutions and even over time, according to policies.
From the banks point of view, it might seem less risky to have 10 individuals with a $100,000 facility each than one individual with a $1,000,000 facility.
Just as us investors mitigate against risk, so do banks.
Thx Rob. That makes sense.
So they are more worried that I might get reduced to a pancake by a bus. That makes it very hard to get much in the way of property then, as an individual.
A mill equals what? About 2.5 houses in most cities.
I have recently had deals for over $1m approved with the same lender (multiple apps/properties) without them batting an eyelid. If the deal is strong and LVR's out of LMI territory or close too, I've never encountered a problem.
I just had an AIP for $2.65M with ANZ (personal client) and all done in 4 days with no conditions bar valuation and LVR to remain under 80%.
In saying this, these clients haven't had aggressive stategies and each client difers from another.
I guess the point I make is that a blanket comment of $1M scares lenders away isn't totally true and may mislead some readers. As most members here would appreciate, every deal is different and needs to be treated that way.
With all of my properties I try to maximise my total lending to $800k per lender so I have room to release equity up to $1mill in the future. Hence I have over 6 lenders I deal with.
It is a strategy I discuss with clients as it goes beyond what you are doing now your financing requirements should look at what you are trying to do in the future. I would rather be seen with a lender as a mum and dad investor with a sub $1mill debt with them, they are not responsibile for my other debts and as long as I service then no issue for them. I get to not only share the risk making me a better risk for them but I also expose my self to different lender policies.
Hence when one lender stops 'cash out' I still have other lenders who do it, so I share my risk amongst lenders and also amongst mortgage insurers (somethign many over look).
So simply yes there is a few extra hurdles to jump through when lending over $1mill with most lenders. But if I were you I would be concentrating on your personal investment strategy and minimising your risk.
Just had a $2.5million low doc facility approved which includes about $400,000 cash out
Every customer is unique and every deal changes the kaleidoscope which the lenders look through
However, having said that, two recent deals for two different customers took their borrowings above the GE $750,000 limit and although approved, the files were 'approved on exemption' to lending policy. Not a problem, didn't even take a day more than usual.
Good, strong customers with good, strong deals are not a problem. Even $1,000,000 low doc no financials loans against one security are not a problem - done a few of them, too, with another on the drawing board - so don't let hearsay deter you from expanding your portfolio as you see fit