Is It Bad to Have All Your Investment Home Loans with One Bank if You Are Still Trying to Build Your Portfolio?

kimba88 on 15/02/2021 - 22:14

I thought I had read somewhere that it's not advisable to have all your investment home loans with one lender if you are trying to still build your portfolio.

It seems I may have reached my ceiling according to one broker and I wonder if it would still be the case if the loans were spread across different lenders? I currently have them spread across different lenders but need to refinance due to pretty poor rates >3.65%.

Does anybody know whether it's better to have them across different lenders or is this old information? Should I try and see if another broker can do better or is this bad? (I personally don't feel good about going to another broker since this other broker has just done some leg work for me-however, I'm not sure I'm happy and feel like a 2nd opinion could be warranted - has anybody done this before?)

I know I could increase my servicing by increasing my income, but at this point, it's not possible to do this unless I get another job.. Or is this possible to do with debt recycling or some other strategy?

Financial Home Loan

Comments

  • jshn on 15/02/2021 - 22:30
    -7

    hei man my English a bit bad . so I not really understand . but for me since I listen minimalist podcast and my personality is same like them about debt.
    the minimalist said "there is no such thing as a good debt" . and I don't like to have debt either.

    and you need priorities your self first I think , don't hope on 1 place because got some leg work. I absolutely appreciate the leg work but I think you should try check other bank. I would feel the same to find other bank because he already help me.

    the choice is your this is only second opinion. and you responsible for it

    PS: I am not financial or anything like that.

    • The-Kremlin on 15/02/2021 - 22:35
      +3

      You are definitely not 'financial'…

      This is terrible advice…there is absolutely such a thing as 'good debt'

      Please learn about finance and money before spewing garbage about debt being something bad and evil…this minimalist podcast you listen to is keeping you poor.

      • jshn on 15/02/2021 - 22:45
        -5

        well I try avoid debt too if I can because I don't feel like going with stable job soo to risky but not sure yet ,can't afford buy house without debt with my money right now.

        why the minimalist keep me poor?

        already told that I am not financial .he just ask for different opinion right. the choice will be him .

        better you give some opinion too then.

        I try to comment to get some advice and some information too maybe will be useful for me.

        • Quantumcat on 16/02/2021 - 00:49
          +11

          Here is why some debt is good.

          Say you have $5. You buy a widget for $5 and next year it is worth $10 so you sell. Cool you made $5 profit.

          But what if you borrow $5 so you can get a second widget. Now at the end of the year they are worth $20, pay back the loan and 25c interest and you made $9.75 instead of only $5!

          So why can't you just borrow infinite money to make infinite money, why stop at borrowing $5 or $10 or $100?

          Say you borrow $100 so the interest is $5 a year which equals your income. No worries right, you can pay the interest and let them keep doubling. Well what if one year they don't go up and interest rates double instead. Now you have to sell without making any profit to pay for the interest, and you're up for the loan amount too. Now you have a loss. Whereas if you borrowed less you'd just pay the extra interest, and wait until a future time to sell when they're worth more, not end up forced to sell when they aren't worth any more.

          So if you only borrow enough that you can cover a conceivable interest rate hike, and you have enough savings so that if you have an emergency you won't have to sell the widget to cover it even if the value isn't up, then all is good. This debt is good debt. This debt is making you more money with an acceptably small risk.

          What bad debt is, is if it is for something that is going down in value. You don't want to borrow $5 for a whatsit, then crash your whatsit and have it be worth zero, then be up to pay for the loan plus the interest and still have to pay for a new whatsit. That's the debt you want to avoid if you can (sometimes you don't have a choice, but at least make it the smallest debt that gets you the whatsit you need, not want)

          • mbck on 16/02/2021 - 04:27
            +6

            @Quantumcat: Whoa i don't think they'd understand all that. Not minimalist enough!

            Ps except high investment cars…theyre always good debts

            Edit:

            Whoa their other comment in another thread is to invest in Indonesia. Wasn't there an asx company that literally had their goldmine stolen from them? Intrepid mine lol

  • miwahni on 15/02/2021 - 22:58
    +1

    Some banks will limit your exposure - it's nothing to do with affordability and everything to do with bank policy. A few years ago when APRA was tightening things up in an attempt to get house prices a bit under control, Westpac (I think it was) was putting limits on the number of investment properties they'd finance for an individual. If you're looking at mortgage insurance, QBE won't touch anyone with more than three rental streams (as opposed to investment properties - eg a rental house with a granny flat is counted as two income streams). And others have a total $ exposure per customer. It could be that you're reaching your bank's limits, unless your broker has specifically told you that it's an affordability issue.

    • kimba88 on 15/02/2021 - 23:21

      I have been told it's income stream that is limiting me.. However, I was told I could barely borrow anymore 5yrs ago (by another broker who has since closed his business) and since then I've increased my income stream, saved more money, and even gained more equity.. So I'm not understanding why my situation hasn't really changed. This makes me wonder. Also, this particular broker wanted to consolidate my loans under one bank without cross collateralising.. I wasn't sure whether this one bank option could also be a hindrance to borrowing capacity, etc.

      • conan2000 on 16/02/2021 - 10:14

        I would suggest looking at what the lowest rate interest in the market you can get is right now and move your existing loans there.

        I personally only use brokers for settlements on new properties, but have found that online only providers are able to provide better rates than places the brokers have access to. E.g. I just consolidated my mortgages to Tic:Toc as they had a better variable rate on PPR and good fixed rates for my investment mortgages. I also reverted all of my mortgages to 30 year terms (they were down to 26 or so at my previous bank). This reduces your minimum monthly repayments and increases your borrowing capacity for further loans.

        The single bank thing is not going to be a hindrance to further investment, as you can just take additional loans elsewhere after the consolidation. This is where a broker comes in handy, they can advise on multiple facets of lender policies. E.g. Some banks have policies about debt to income ratios. I was told that CBA were a bit riskier for us in terms of approval, as our debt to income was >6 years income. This can become problematic as you buy more properties as your income will go up by the value of rent, but the debt on the property is many times that extra income (E.g. we were borrowing $585k and rental income is about $30k). So as we get more properties, some banks will not lend to us. A good broker will know which banks to use in which situations.

  • TheBilly on 15/02/2021 - 23:53
    +2

    I feel like not being able to borrow more is a good sign to stop lol just saying

    • Quantumcat on 16/02/2021 - 00:54
      +1

      That's true though. You don't want to borrow right up to your limit as something bad could happen and wipe you out.

      • SF3 on 16/02/2021 - 01:02

        borrow right up to your limit as something bad could happen and wipe you out.

        True, but that’s more of a gambling mindset. But of course people don’t like to admit it, and like to call themselves an Investor to justify their own actions.

        • The Wololo Wombat on 16/02/2021 - 02:43

          You're projecting here.

          You tear others down down (who are more financially successful than you) because it vindicates your current position in life. Tall poppy syndrome.

  • The Wololo Wombat on 16/02/2021 - 02:36
    +2

    This is a question for propertychat (forum) not Ozbargain.

    You're likely to encounter people here who are too safe or (insert nicer term) ignorant to help you here.

    I have 8 properties all with COMMbank. Diversified is theoretically better/safer, but not if it's a barrier to growth.

    Getting finance is 50% of property investing. Do what it takes if you really want to succeed here, but (obviously do your due diligence and don't buy bad investments… just because you want to grow).

    • Ghost47 on 16/02/2021 - 22:42
      -4

      8 properties? Wow you're so cool.

      How many properties are you hoping to have in total? 50? 100? 1000? Are they residential or are they commercial?

      • The Wololo Wombat on 16/02/2021 - 23:55
        +2

        I read that with a condescending tone. Why? Does my (relatively small) success upset you?

        The implication here is that you think I'm boasting? Why would I keep this info to myself, on an anonymous forum post that is SPECIFICALLY looking for advice from people with my experince?

        Correct me if I'm wrong, but I don't think your questions were genuine.

        If you take issue with what I'm doing, come out and explain precisely WHY. Perhaps you might learn something from me if you were humble enough to ask these questions in a genuine way.

        • Ghost47 on 17/02/2021 - 00:52
          -2

          I was being genuine actually, so you are wrong. How many houses do you wish to own one day? 10,000? The question is basically this — Where does it stop if you already own 8? Clearly 1 didn’t make you happy. Nor did 2. Nor did 3. Nor did 4. Nor did 5. Nor did 6. Nor did 7. Will owning 8 make you happy? How about 20,000 homes?

          If you think I was being condescending maybe there’s a part of you deep down that thinks you’re doing the wrong thing?

          No offense but there’s nothing I wish to learn from you actually, thanks for the offer though. Property investing requires too much time and effort for me (especially if you want to be a decent landlord), and I’m not interested in doing that much work to grow my wealth. I grow my wealth the lazy way — in my sleep.

          • The Wololo Wombat on 17/02/2021 - 01:59
            +2

            @Ghost47: No. You were not being genuine and you don't think I'm cool. You are asking those questions in order to lead to your point:

            I take your to point as this: The accumulation of (property) investments doesn't make one happy; perhaps (even) that the pursuit of wealth is perhaps vanity/futile.

            This comes with a judgement: that my energy would better be spent in more 'meaningful' pursuits… (ones that make me happy?)

            Fair?

            • Ghost47 on 17/02/2021 - 10:50
              -2

              @The Wololo Wombat: Yeah you’re right I don’t think you’re cool at all, it was complete sarcasm.

              And that’s not my point. My point is “where does it end for people like you?” Obviously one investment property didn’t make you happy. Nor did two. How about three? Nope. Four? Nope. Five? Nope still not happy. Six? Thought so but no got the itch to buy another. Seven? Nope. So is it eight then? Is that a magic number that will make you happy? Or is the magic number 107,628 houses?

              The judgement is based more on your greed and tendency to hoard homes more than anything.

              • The Wololo Wombat on 17/02/2021 - 17:53
                +2

                @Ghost47: Yes. You were not genuine and neither were your questions.

                You have been quick to judge me (as greedy) without knowing anything about me. Because judging the success of others (from afar) protects your ego from your own (subconscious) weaknesses. The harder path is to act with humility and reflect on precisely why your natural response is to attempt to cut others down; integrating your weaknesses.

                Now, I’ve encountered plenty of unhealthy people like yourself, so I’ve learned that answering your questions is useless… but in case I’m wrong:

                I plan to own 16 properties, by the age of 40 at 50% LVR, average value of $250,00 at 2012 AUD at 8% yield. I prefer to build instead to buy, to increase the supply.

                • Ghost47 on 17/02/2021 - 19:34
                  -2

                  @The Wololo Wombat: You saying you have 8 houses was enough to show how greedy you are. The fact that you mentioned 16 compounds that, and I seriously doubt you’ll stop at 16. I’m sure a nice round figure of 100 by 65 will be good.

                  I hope for your tenants’ sake that you’re also keeping a close eye on every one of those properties yourself and following up with requests promptly, or actively ensuring the property managers you are paying are doing work.

                  Pretty interesting how offended you’re getting to be honest. If you were so sure that you’re doing a good thing for society, then getting mad at someone on the internet calling you out for being greedy shouldn’t offend you — because I must be clearly mistaken. And let’s not act cute about your success being “relatively small”. You own 8 properties and there are people making more sacrifices than you ever will have to make to own 1 property. Riding the property boom is nothing to boast about.

                  Oh, and don’t act for one nanosecond like building houses makes you any better when you’re just renting them out and getting people to pay you for them. The noble thing would be to build houses and sell them for under market prices. But hey, succumbing to greed is pretty easy (shall I continue about the point on integrity?)

                  • The Wololo Wombat on 18/02/2021 - 01:48
                    +1

                    @Ghost47: The reason I seem offended is that it's frustrating to be doing a positive thing for society and then be judged as 'greedy/boasting' by people who know next to nothing about me.

                    Now, there's a chance you are right… Some (perhaps many) people who invest in property, could be greedy… but not all…

                    For a complete stranger… to extrapolate this and place it on me (based on very few words), really suggests a deep issue - that you are projecting your own (subconscious) bias/weakness onto me.

                    That is to say, that deep down in you, there exists a propensity for (perhaps) greed, or a jealously of success, or (maybe) a pain of feeling inadequate that you are trying to protect… that you have not come to terms with, or even realize is there.

                    You don't call me greedy to try and change me. You're not condescending to try and help me. You're attacking me from a place of deep hurt or frustration. It helps protect/cure that weakness (in you).

                    So… the reason I keep replying is that I'm using this situation to practice articulating what's going on from a Jungian analytical psychology perspective (I've been reading a lot of Jung lately lol)… so when people judge me in the future… the language needed to describe the complex psychology will be easily accessible to me.

                    Also, perhaps there's a part of me that wants to help you (or maybe not and I'm being completely selfish here)

                    Carl Jung would suggest that the consequences of these judgments/projections will lead you to a pretty dark place and risk very negative/personal consequences for you (perhaps the loss of career prospects, or friends). When (if) this occurs, then you will be in a position of critical self-reflection to make peace with AND integrate your weaknesses (he calls them 'shadows).

                    But, perhaps if I call them out earlier, you identify them, battle with them and integrate them sooner, without having to suffer and you'll be a better person for it.

                    I'm personally on the same process of integrating my own weaknesses/shadows. I will continue to reflect on my motivations and try to identify any motivations of greed, or laziness, or areas where I've become comfortable with the exploitation of others… However, I don't think these are where my shaows lie…

                    • buckethat on 18/02/2021 - 02:05
                      +3

                      @The Wololo Wombat: Just ignore the dude, somehow he seems upset that there are people out there trying to build wealth.. like it was a bad thing..? He's literally oozing jealousy.

                      And to be honest, theres nothing wrong with being greedy. Fortunately, we live in a capitalist society where you're allowed to be greedy, and the greedier you are, the further you can get ahead.

                      • The Wololo Wombat on 18/02/2021 - 03:45
                        +1

                        @buckethat: Haha thanks mate!

                        It's an opportunity for me to practise articulating myself…

                        I'd challenge the idea that greedy is morally neutral. I think there are social and personal consequences to greed… I also think you can build wealth without being 'greedy'.

                      • Ghost47 on 18/02/2021 - 10:42

                        @buckethat: Some people call it building wealth, some people call it hoarding. There are actually social and ethical issues to property investing. If you can’t realise this then you must be a property investor.

                        Next time you’re looking to purchase something let me know and I’ll buy them all before you can, then we’ll see how you feel about greed.

                        • buckethat on 18/02/2021 - 12:11
                          +1

                          @Ghost47: If you've worked for your money and want to spend it on property, whos to say otherwise? How is it any different to say… wanting to buy a bunch of cars? Why is it greedy to spend the money you have earned on whatever you want. Anybody else can do the same.

                          Next time I am looking to purchase something, and they get taken off the market before I get to them, will I be disappointed? sure but hey thats life, you dont always get what you want. Simply move on and wait for my next opportunity. I'm not going to sit here and complain that the world is unfair because people are choosing to buy the same thing that I want to.

                          Edit: reading your replies, it seems you are so righteous, I hope you actually live by your words and donating a portion of your income to charity or something. If all you're doing is preaching to people online about their greed and not actually doing anything yourself then you're nothing but a hypocrite either. Then again, I don't know you so maybe you really are a saint.

                          • Ghost47 on 18/02/2021 - 19:16

                            @buckethat: Warning: long reply but I hope you read it, there’s a TLDR.

                            I donate to charities if friends are participating in fundraisers, yes, also when I participate. I also donated to GoFundMes before (one of them was for a 16 year old kid who was hit in the head with a rubber bullet during the BLM protests or something, this was sometime last year — you can look his name up, it’s Brad Levi Ayala. It was (profanity) tragic what happened to him, but I digress). And I don’t own a house, I rent and scrimp where I can. I’m not rich, but I give where I can — and I don’t (profanity) hoard things to make life more unfair for others. I don’t take advantage of things just because I can afford to buy all the roast chickens at Woolworths.

                            I’m seriously surprised that people seem to think it’s socially okay for few people to own most of the houses, because that’s the way it will go with people like Wombat. Yeah okay you can make the argument that it’s your money, you worked hard to earn it so you can do what you want with it — but trying to hoard what is a basic necessity for most people is just unethical IMO. How do you feel about people who bought all the toilet paper during coronavirus? Did you have a “good on them” mentality? “Capitalism! (profanity) yeah!”? How would you feel if someone or a company just bought all the freshwater in Australia and just kept hoarding it, then sold it back to you for $50 for 600ml bottle? If you’re going to say “that’s fine, it’s their right” then we are fundamentally different people. You mentioned when you miss out you just move on, it doesn’t phase you or whatever — but to me that’s just rolling over and accepting the world for what it is, that’s not a good thing IMO.

                            People like Wombat just act to increase the gap between poor and rich. Look at the ultra rich, Bill Gates and Warren Buffet are going to donate like 90% of their wealth when they die. I’m glad they aren’t inherently the same as Wombat, because the world would be in a much worse state than it is. Buying houses to lease them out isn’t doing a good service — anyone who believes that has skin in the game. If I had money I’d build a (profanity) valuable company that would benefit the lives of thousands, although millions would be awesome — THAT is capitalism. But I don’t know if I will have the money, with the way house prices are going (guess why?) money will have to go to a mortgage instead. And doing that kind of thing isn’t easy… hence why people buy property. But I’d rather do nothing than hoard properties for myself and act like I’m doing good by the tenants — especially if I am not taking good care of them due to having so many homes.

                            It also gets to the point where, if someone owns that many houses, are they really taking care of their tenants? Because I can imagine people not giving a stuff, or being too busy with other things.

                            TLDR I donate, and I’m not rich. There is issues with fewer people owning more houses — even if they can afford it, even if they earned it. IMO Wombat only acts to grow the gap between rich and poor. I doubt landlords with many houses actually take good care of all their tenants. Buying to let is not capitalism — building a company to benefit millions is, and that’s what I would do if I had more money — not buy stupid houses. And I would especially not ACT like I was doing something good or make excuses for my greed. Maybe I should be more selfish in life, I’d probably get more out of it eh? Literally get more.

                            Honestly, I just think that property investing is for simpletons. Acting like it’s a free market and this is what capitalism is, is simply the most unintellectual thing that I see people say.

                    • Ghost47 on 18/02/2021 - 10:39
                      -1

                      @The Wololo Wombat: Not going to bother reading all this after the start. There are actually many social issues that can arise from few people owning the majority of housing, if you can’t see that then you’re biased — and it’s obvious why. Don’t act like making people pay you to own your assets is helping people.

                      • The Wololo Wombat on 19/02/2021 - 00:44
                        +2

                        @Ghost47:

                        Because I can imagine people not giving a stuff, or being too busy with other things.

                        This is precisely it. You are imagining.

                        You have no idea who I am or how I run my life/properties… how I care for my tenants. You have no idea of how generous I am, or how I help others. I'm just a caricature for your imagined political/social adversaries… a scapegoat for you to attack to protect yourself from facing your own shadows.

                • kimba88 on 19/02/2021 - 12:27
                  +2

                  @The Wololo Wombat: Thanks for your reply. I'm sorry you've had to encounter someone else's jealousy. I am personally interested in building too.. To take advantage of depreciation. I've only built once, but would like to do it again. I'm interested to know how you find which housing estates, etc. Please PM me if you'd like to discuss :-)

                  • The Wololo Wombat on 20/02/2021 - 02:22
                    +1

                    @kimba88: I'm happy to share my experiences if you want to PM me :) Property Chat is a great forum for that advice also.

                    I've not built on estates…. so there's that (for starters) lol.

  • hoey888 on 16/02/2021 - 09:24

    just be aware refinancing means new loan application form. usually this means they will interrogate you about your situation. some questions you wouldn't want to answer as it would affect your loan application; especially since you are at the upper end serviceability requirements.

    if you are looking at unlocking equity from one or more the properties might be best to speak to mortgage broker.

    keep in mind by changing your lender now to get <3.xx% doesn't always mean you'll get always get a low rate. you could just be going to a lender that aggressively chasing market share who will eventually start increasing rates (compared to peers). maybe speak to your existing lender and say XYZ is lending at <3.xx% and threaten to move and see how you go.

  • Some Guy on 16/02/2021 - 22:43

    I had not heard of this. In fact, when I looked at refinancing two nearly paid off mortgages a few years ago, the broker said that I should buy a third property to make it more attractive for the lender. AFAIK, as long as the lender is satisfied with your capacity to repay, it shouldn't matter if all loans are with the one lender. It's not like you can hide loans from lenders.

  • Pleasure Paulie on 25/03/2021 - 22:57

    No. Just keep them not crossed and exposure is limited.

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