Major challenges vs possible solutions.
We are often asked by property investor clients what is the best option in terms of going with one lender or split bank/lenders relationships.
While we all know that best investment strategy is not to put all your eggs in one basket, when we apply it to mortgages, I personally feel the same principal applies. Although worthwhile to emphasise that every client’s financial situation is different, our core value as a financial advisor is to understand each client’s needs and assist with the best possible funding option.
It’s fair to say, NZ banks might have provided easier access and cheaper funding to property investors, compared with current CCCFA (Credit Contracts and Consumer Finance Act) implications with tighter servicing requirements and changed lending conditions. The difference in terms of whether all your mortgages currently under one bank or a split banks were not a major concern, however the table has turned and we have seen some challenges which are summarised below –
- When personal situation changes requiring a property to be sold, say needing to sell property and get cash on hand, bank demands full sales proceeds ending up with nil cash available after repaid bank’s loans;
- When current interest only (especially for investment properties) loans expire, principal repayment kicks in, clients are facing much higher loan repayment.
- Lack of further funding strategy to move forward with their current property portfolio or getting into property investment ladder.
- Age restriction etc.
The next question is what a client can do in those situations or at least aware of possible options –
- Preparation, Preparation, Preparation. Getting in touch with your trusted financial advisor as early as possible especially around current fixed interest rate roll over, Interest only expires etc. Preparation and being fully aware of your options is the key.
- Any new purchase(s) taking into consideration of split bank relationship instead
- Keep regular contact with your financial advisor, especially when your personal situation changes
- Bear in mind what is your ultimate financial goal, remember you can only make the best informed decision at any given time, be alert and open about other funding options – what are relevant benefits, associated costs and potential risks if any, then make your best possible solution from there.
As always, we are here to help, get in touch with us today.
#propertyinvestor #propertyinvestment #lendingstrategy
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