One Bank Trap, Any Live Examples??

[PTILoveYou]

Hi all

After my recent outburst about Stupid Banks, I really thought hard about the concept of the one-bank trap.

Basically for the 5 years ever since I started investing, I have been a strict follower of not getting trapped with one bank...

However, Wespac has really got on my nerve for the past 3 years with their constant crap mortgage interest rates, and now all the appalling conditions like credit card, savings account, salary direct credits etc BS... So I am seriously considering ditching Wespac in the next 6 to 12 months.

BUT, before I do that I just want to see if anyone has been stopped in lending due to having too little banks??

Also does lending really become harder when your individual bank mortgage gets above say $1.5 or even $2mil? What happens after that? Besides having to deal with bankers of higher and higher authority, are there any special or new restrictions inside the banks for larger customers?

Many thanks

Gary

[Damap]

It is usually only when things turn to custard the banks become an issue.
In the GFC we had 3 banks recall loans and 1 bank forced us to go onto commercial rates and change our 25 year note to 10 years.

At that time anything over a mil got you on their radar, these days it is probably more like 3 mil if you're in Auckland.

The other "risk" with 1 bank is everything ends up cross collateralised. We were in that situation which gave all the power to the bank.
So bank spreading is a risk minimisation and disaster recovery strategy, that's when you wish you had done it, not mid boom :-)

[PTILoveYou]

It is usually only when things turn to custard the banks become an issue.
In the GFC we had 3 banks recall loans and 1 bank forced us to go onto commercial rates and change our 25 year note to 10 years.

At that time anything over a mil got you on their radar, these days it is probably more like 3 mil if you're in Auckland.

The other "risk" with 1 bank is everything ends up cross collateralised. We were in that situation which gave all the power to the bank.
So bank spreading is a risk minimisation and disaster recovery strategy, that's when you wish you had done it, not mid boom :-)

Thanks mate, looks like I have done things correctly then =)

Only wish Kiwibank had more higher level business managers so I could have loaded Kiwibank more!

[propertybuyingNZ]

Hi guys,

what is the best way to approach this switch to other lender?

you have a revolving credit at bankA for 200k and you just go to bankB, ask for a 20% deposit approval lending and you say you have "cash" deposit of 200k?
they are not questioning where the deposit is from?

cheers
p

[Damap]

No they won't. You may have to put it in a bank account so they can see it exists sometimes, depends on your broker and the bank.

[PTILoveYou]

you have a revolving credit at bankA for 200k and you just go to bankB, ask for a 20% deposit approval lending and you say you have "cash" deposit of 200k?
they are not questioning where the deposit is from?

I tell my banks that my deposit is from my revolving credit facility.

Never had a problem.

[propertybuyingNZ]

care to share which banks has no problem with it Gary?

[PTILoveYou]

care to share which banks has no problem with it Gary?

i use asb/bnz/wespac/anz/kiwibank

[propertybuyingNZ]

oks, so all the high street ones, thanks Gary and Damap!

[Orpheus1]

Is there not a benefit with going with one bank in terms of tax advantage?
Ie. To have an LTC all your lending has to be with one bank does it not?
I have 1.5m debt on 2m portfolio with SBS

The way its set up is I have 135k of debt against the PPOR, everything else is on the investment properties and the business..

[Frezzinghot]

I too am with Westpac on one of my loans and am trying to break the loan to take advantage of lower rates, loan amount is 120k but initially last week they were not coming into line with the other major banks, but just heard from our broker yesterday that they are coming into line, I think they may be finally listening to all the unhappy customers out there.

FH

[PTILoveYou]

Is there not a benefit with going with one bank in terms of tax advantage?
Ie. To have an LTC all your lending has to be with one bank does it not?
I have 1.5m debt on 2m portfolio with SBS

The way its set up is I have 135k of debt against the PPOR, everything else is on the investment properties and the business..

Having one bank only only reduce accountant fees, ie small money.

having more loans with one bank gets you better interest rate too, ie small money


The idea of having multiple banks is trying to maximise lending to make the big money.

[Orpheus1]

Having one bank only only reduce accountant fees, ie small money.

having more loans with one bank gets you better interest rate too, ie small money


The idea of having multiple banks is trying to maximise lending to make the big money.

Even by using several banks doesn't the first bank take out a higher loan amount (not sure what its called) so When you go to bank two and bank three there is little advantage?

How much debt are we talking to get maximum effect?

I.5 m with one? Do you think I could get a better result by splitting that up?

Ie: More leverage?

[Damap]

The idea of one bank per entity is to avoid cross securitisation it is not a "requirement" just a good risk minimisation strategy.

It's called a priority amount and it only affects the entity they have security over.

[Orpheus1]

The idea of one bank per entity is to avoid cross securitisation it is not a "requirement" just a good risk minimisation strategy.

It's called a priority amount and it only affects the entity they have security over.

Yep thats it "Priority amount"

So does splitting them up over a couple of banks still really matter if they have the above?

You go broke with one bank you go broke with the lot etc?

Does having an LTC really have a benefit?

For me it means I have very little debt against my PPOR valued at about 900k (135k debt)

The investment props are max however, but does that not have the best tax advantages?