Unfortunately the big banks seem to get away with this kind of thing as consumers seem to either do not know any better or are too lazy to move their banking when they do.
People don’t seem to realise that bitching and whinging about rates doesn’t really do anything, the best way to provide feedback is to move your banking elsewhere.
In fact, personally I would split the collateral and loans as well. However to some people, having a home loan to manage seems like a big gigantic hassle. Was just pointing it out as an option, I wasn’t really suggesting or recommending it.
The benefits, I talked about was for keeping the loans under the same bank, not to cross collateralise. Reading through my previous posts, I can see that maybe I should’ve answered in more detail. Thanks.
Im always happy to hear your feedback and point of view, but please don’t accuse me of what you just said.
As I pointed out, I am an EX bank staff. I have no interest whatsoever in helping banks make more money. In fact if I can help someone save money from the big banks, I would be very happy.
Fact is that if you have a larger loan amount, you can negotiate a better rate discount from the bank. Usually these are with the wealth package or whatever each banks calls them. That doesn’t mean you are unable to shop for a better rate with an online bank even after the discount the big banks give you.
Paperwork – If you have all your accounts under one bank, it means that you do not need to provide paperwork from other banks. YES I know getting your paperwork is easy, but just because it is easy for you doesn’t mean other people don’t find it tedious and inconvenient. You have no idea how many customers out there opt to stay with one bank just because they can’t be bothered with paperwork.
FYI in the past when I have encountered clients whinging about being able to get better rates somewhere else and online, I have always told them if it’s solely the rate you are looking for than you go go with whoever gives you the lower rate. 80% still come back due to convenience and the perception that they will get better service. Will they get better service elsewhere? I don’t know I haven’t tried other people’s service so what can I say.
Again I like have clarify that I no longer work for any banks nor do I have any interest in helping them make money. If anything, I write articles on how people can cut down on fees and interest they pay to the bank and how to negotiate better against the big banks.
For accounting purposes it would be easier for you to use your PPOR + Investment property as security and have only one loan. However yes you would need to cross collateralise.
There are benefits or keeping both loans in one bank:
– A lot less paperwork needed for future loans.
– If you pay your bill on time, it generates a good credit record and strengthens your relationship with the bank. During my past experience as a lender, I’ve found that the credit department are more likely allow existing customers with a strong relationship with the bank to borrow outside or regular criteria.
– You can negotiate a better rate with more loans under one bank.
Downsides of having all under one shop would make it harder for you to leave to another institution and also can be complicated if the banks are reaching or have reached their risk threshold.
I bought for the exact reasons you posted few years back and I would really not recommend doing for that reason.
Although I am happy for the lessons I have learned being a home owner and landlord, I would be in a much better financial position now.
Even though the mortgage might be cheaper than rent, you have to think about all the extra headaches that go with owning property. Bills, council rates, insurance, maintenance costs and so on. Also what if you lose your job or want a change in career or want to start your own business? Not having that commitment is going make your life just that much easier.
However if you are set that this is the right decision for you, there are a couple of options which I think are better than a personal loan.
You mentioned that a long settlement will give you enough time to save up for stamp duty. You could switch your credit card to a card with a lower cash advance interest rate than increase your credit limit and do a cash advance (this will not increase your commitments by too much on the banks calculator as most banks calculate your credit card commitment based on approx 2.5% of your max limit). If your bank does not offer a cash with a low cash advance limit then you can balance transfer to another credit card with a lower rate. Just be aware to check your borrowing capacity allows your to have two high limit credit cards.
Most banks do not like customers using cash advance on their credit cards to cover purchase costs but if you have already done the cash advance prior to borrowing they can’t really ask you “where are you getting the money to cover stamp duty”.