I am trying to work out if I’m really getting a good enough deal on interest rates from my bank. I’m not talking about introductory rates, but ongoing rates on larger loans.
I bank with CBA, but through Commonwealth Private, and they are giving me 1.15% off the SVR. So after they pass on the .20% (CBA ripped off 0.05% of the cut) I’ll be paying 4.3%. I get excellent service, which I appreciate is worth some premium.
Does anyone know what the absolute best rates banks can offer are?
This is in the context of owing $6mil across a number of loans on about $11mil of property. I also have other share assets, etc, so my overall LVR is only about 35-40%. I have very high cashflow/income so there is no issue with serviceability. I’m in my early 40s, so I have plenty of time before I realistically retire.
My problem is the opposite of most, I been leaving millions in off set accounts, when it could be working harder for me. I’m also pretty conservative, and have never been in a rush to get rich. I did that through building a business and investing sensibly and consistently.
On the negative side, like most business owners, my financial structure is complicated, with incomes running through a family trust, circulalatung through a corporate beneficiary, and holdings in other trusts, SMSF etc.
I’ve been banking with CBA for 15 years, they transferred me to Commonwealth Private about 5 years ago because of my loan amounts but especially my income was increasing rapidly. They now also manage $2 million in my SMSF and in other shares I own, which I am adding $400k to each year to better balance my investments long term.
My business banking is with NAB, but we don’t have an debt so it’s just transaction accounts and term deposits waiting to pay out as dividends.
I think I would be a pretty good long term client to have for any bank, but I just don’t know what is possible to ask for without damaging the relationship. They are keen to lend me more money, and I am looking to borrow another $3 million to buy more property, while still committing to building my super to the extent the rules allow.
I realise I’m not the typical investor profile and everyone’s situation is different, but if anyone can shed some light on what is possible that would be much appreciated.You have the bulk of your assets controlled by the on bank? Eek. If they ever need to liquidate due to non-payment of loans or othe reason, then they will decide order of liquidation, not you.
There is not much point making threats of moving your SMSF loans as it is pricey to do so. However don’t mistake the relationship for some lovely thing shared with another human with flowers and chocolates and such. Business is business. Politely point out they enjoy your substantial custom and are looking at conducting a review of your position in terms of rates on offer. See what they say.
Jacqui Middleton | Middleton Buyers Advocates
http://www.middletonbuyersadvocates.com.au
Email Me | Phone MeVIC Buyers' Agents for investors, home buyers & SMSFs.
To echo Jacqui – I’d be concerned about having all lending and assets with one bank. Eggs and baskets come to mind.
In this particular scenario you are the one with the power with the substantial lending amount. In saying that though, I received an email from CBA this morning saying “We have also reduced pricing discounts for Investment Home Loans…..Discounts are still available for Owner Occupied lending”. Banks are generally more aggressive with pricing new to bank lending as opposed to existing lending unfortunately.
All you can do is ask. I wouldn’t be too concerned about damaging the relationship as they don’t seem to be. Present them with interest rates you would get if you were to move to another bank and ask for them to match and if they don’t threaten to leave. They may realise the complexity of your structures and may call your bluff though. If they do then it’s up to you on how to proceed.
As a guide, I negotiated 1.25% recently for a client who had over $1m lending and <80% LVR. But, this was before the change in pricing.
Kinnon Bell | Kinetic Funding
http://www.kineticfunding.com.au
Email Me | Phone MeMortgage & Personal Loan Broker based in Cairns and Melbourne but servicing clients Australia wide.
I just got a 1.18% discount with Westpac for a $900k 90% LVR lend with no lmi (dr). recently get 1.25% off with St G for a similar amount. 1.05% off ANZ for $512k etc
but with CBA got 1.05% off doe a $430k lend.
So your 1.15% is not much for such a high debt.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks for the replies, these are really helpful.
Sounds like I’m definitely not getting the best deal from CBA, so I will tackle them on that. I fully understand it’s a business relationship.
On the one bank lender aspect, I had been told in the past to exhaust one bank before moving on to another.
Is that what’s usually done, recommended?I realise the loan amounts are high, but I’m earning $1.5mil+ p.a from my business in a tax effective way (30% max). The business is rock solid, a specialised professional services area with 5 partners (I’m at 30%) and 30 staff, zero debt, running for 12 plus years, turning over $10mil with 45% profit margin, growing turnover by 10% pa. I manage to save/invest 85% of what I earn.
I’m unlikely to have an issue with non payment as my interest payments after rents and expenses (but before depreciation etc) currently total $60k p.a. and I have substantial buffers in offsets and shares outside super that would last 10 plus years without having to sell anything if my income suddenly stopped. I’m also insured to the hilt to cover health related events.
Are there some other risks that I’m not thinking of that could eventuate?
I was thinking it’s more about what I do in the future in terms of borrowing, rather than worrying about refinancing my existing loans.
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This reply was modified 9 years, 7 months ago by
Char.
I am generally in favour of giving all loans to one bank initially to get a larger discount. Discounts are for the life of the loan so you can gradually refinance a few loans away without dropping rate. But I generally like to keep loans around $2mil per lender.
The risk comes down to missing a loan repayment or 2 and things slowly escalating. If that happens then all your eggs are in the one basket and it will be hard to take control. If you had the loans split up with the different banks you would be more protected. If cashflow got tight you could sacrifice one property and keep paying the rest. The bank would take possession of this one property, sell and repay the loans. If this is not enough they would come after other property you have with them. lastly they would go after other property with other banks, but this would be a long time later and this extra time would give you a chance to sell yourself.
In summary as long as cashflow is ok and business risks are low then you should be fine with one bank, but it wouldn’t hurt to spread them around a little bit – it could only help reduce risk. And the interest rate would probably not be any higher and may even be lower.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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This reply was modified 9 years, 7 months ago by
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