Bank Rules

[drelly]

When sourcing finance for a recent purchase, I went to my trusty long term bank... Westpac.

After verbally approving finance assuming I could get valuations that showed a certain amount of extra equity, my personal banker informed me that he "didn't know" that after 4 properties (I already had 5) that the criteria for LVR dropped from 80% to a maximum of 75%! So he'd need another valuation (more expense!).

Not only is this the last in a long run of stuff ups but it affects my borrowing ability by a not insignificant degree.

I've been considering looking at an alternative source of finance as I don't have to settle until 22nd April.

So what would you suggest?

Mortgage brokers mean you have no personal influence with the bank.
Do you have a personal banker with Bank Direct? (Good rates)
Are there any banks to be avoided/recommended?

[Julian]

Try TSB Bank.
Or speak with Dianne Dunn of ANZ (Te Rapa) (07) 850-8632
Julian

[Monid]

Definitely try a new bank (Presuming you have the deposit or can manufacture it) I've found National very good, though personally I am going to try either Kiwi or Bank Direct next myself.

[Vern]

Dave

Try Pacific Mortgage Corporation in Queensland.
Only have floating mortgage (fixed is very expensive) but that relate usu 20 -30 points below NZ floating. Talk to Michelle Sells/David Vickerman

https://www.pacificmortage.com.au

Cheers

V

[oc]

Dave

Sounds a familiar story - I was with Wespac in 1996 and lined up finance to purchase investment property they stated they would lend up to a certain percentage of RV and after having an offer accepted on a couple of properties (subject to finance) Westpac came back an said I could only purchase one - on asking why they wern't honouring their offer they stated "We didn'd know you would purchase well under RV." With only 90 minutes left to confirm the contract we went off down the road to Countrywide. Thankfully after asking if Countrywide wanted our business we were granted an immediate interview with the manager and 40 minutes later our finance was approved. I had much please in returning to Westpac to ask for my overdraft and bid them farewell.

Luckily when Countrywide was taken over by National the local management (Timaru) gained all the senior positions and apart from a bit of extra paperwork it has been business as usual. We have purchased a total of 9 invement properties from 1996 through to early 2003 one being a small commercial property neither Countrywide nor National required any valuations and each new investment was incorporated into the existing mortgage.

I have found the personal contact with the people at the bank to be beneficial and thankfully the staff are stable so we end up dealing with familiar faces.

The number of individual properties should not affect the LVR and one could argue that 10 100k properties as opposed to 3 350k properties will be less affected by vacant periods.

You should be able to get a better deal.


Good Luck

OC

[learner]

Hi Dave

You will find most banks, after about 4 properties or so, that they will either transfer you to their business loans people (at business rates), or place some sort of restrictions, as you have found out. That is one reason why it is a good idea to borrow from more than one bank.

I find the benefits of a personal banker a bit doubtful, as I have had a number of them in various banks because they all leave after a certain time, and you have to build up a relationship again.

I used to borrow from WestPac, but finished with them when they changed their accounts, even though the bank manager was willing to tailor a special account for me

KiwiBank and BankDirect have some of the lowest rates about. I have not dealt with KiwiBank, but Bankdirect have been good (with a 4 property limit, last time I inquired).

[drelly]

Thanks for the feedback. I thought I'd let you know how my enquiries turned out with Bank Direct and National Bank.

Bank Direct

Max 80% LVR
Willing to finance without fees
If the total rental income from all sources exceeds personal income, then the application would be referred to an ASB Business Manager as Bank Direct has no business banking division.

National Bank

Max 95% LVR
They take 30% of taxable income and 75% of rental income. Total repayments should be within this figure. This assumes no other debt. He seemed to be working on interest only as a matter of course. I have an appointment with NB tomorrow.

Considering NB are so servicing focussed, this does seem to benefit the CF+ investor. I'll definitely be asking what limits they have on this if any.

[JackHu]

There is a saying in the banking business: "We don't give unsecured lines of credit to bullfighters, parachutists, and real estate investors"

You should try to establish a good credit rating so you can borrow large amounts of money quickly on an unsecured basis.

If you don't alredy have a good credit rating , open checking accout at several banks. Find those whose loan officers are friendly and interested in helpin gyou establish a credit rating of through borrow small amounts of money. I believe there will plenty of banks in your area to deal with, and banks are in a keenly competitive business so YOU are the BOSS and don't be afrid to get up and walk out of a bank that is not reponsive to your needs and wishes

Hope this helps

[janesco]

I found this to be an interesting thread...

I have recently enquired of my bank whether they would lend me another 300K. I will check said my personal banker. ( who I could never get hold of, nor would answer my emails)

Back came the reply "Well I have refered your request onto our business manager. He says "no".

"What" I replied. "I meet all of your equity and serviceability rules".

"I know" said he. "I hope you aren't upset".

"well can you tell me how I can free up one of my properties that is free hold that you are using as security?" sayes I.

"Oh" sayes he. "What do you have in mind".

I think it is obvious that if a deal comes along that meets my rules I will be going to another bank.

As it happens I was only exploring the various deals that seemed to be available to me at the time. But it transpires that if you have more than five properties or more than a $mil K loan then you are considered a bigger risk. Never mind that you don't have any personal debt at all. Never mind that you always pay your bills on time. Etc etc.

I don't know it seems stupid to me. I would prefer to deal with people that have a proven track record than someone who hasn't.

[Monid]

Hi Dave
re: that %95 LVR, I have queried this several times with different people at National, and they always at the end of the day come back to what I would call %80 LVR. I think what they mean when they talk about %95 LVR is that for one property they are willing to lend upto %95 of its price or value, but accross your whole portfolio they still want the magic %80...

At 5 properties you do get transferred to business banking with National, but thus far at least they haven't tried to change the rules of the game with us, so it really seems to be a formality rather than a restraint.

Nonetheless as happy as we have been with National, we are going to try someone new next time.

[Julian]

There are quite a number of banks out there. So if you reach one bank's comfort limit there should be plenty more to chose from. Similarly if you change to commercial rates, and that is the best rate you can get, then check to make sure the deal still works, and if it does then go for it.

The other option is to stall, take a holiday, sell, change investment vehicles or whatever. This can be a viable option, but it is important that YOU make the decision, rather than have it made for you - to the extent that this is possible.

Julian.

[hort1]

Dave

You sound as if you are in the ONE bank trap.
We just about got into it with the BNZ, I suggest as soon as the bank you are with start asking for little things they havn't before i.e valuation ect time to move on.
Our last few PI have been via a broker and I find it a lot more stress free.

Good Luck

Warwick

[janesco]

Now about this one bank trap.....

Yep I have heard of it.. I have read repeatedly that when you have $1mil or five preoperties with one bank new deals should be done through a different bank..

Ok I can see some merit in it. But surely if you disclose the amount you are in the hole (as it were) to another bank the new bank would become just as difficult?

Unless of course you didn't disclose the information.. I can't see that as a good idea.

So how are you better off going to a new bank?

[Julian]

Janesco,
Some banks will ask about other borrowing. Some will not. If you are asked then answer truthfully. If you are not say nothing.
Julian.

[drelly]

More great replies...

Julian
I was transferred to Westpac's business banking manager although the interest rates remained the same. What sort of difference is there in actual commercial rates?

JackHu
I have no problems at all with my credit rating and even the Westpac guy said I have a really good track record and that they want to keep my business. I think I'm just getting out of their comfort zone.

Janesco
I know how you feel... I don't think they feel comfortable with residential investors. We fall into their "grey area". They'd rather lend $1m to someone to buy a beachfront property in Auckland that produces no return!

Monid
Nothing would surprise me. The "rules" do seem pretty flexible!

Hort1
Having a relationship with Westpac *has* helped me so far but I can see a point in the near future when individual relationships with a bank are no help at all.