Are you finding it harder to borrow with the same bank? Do you ever wonder why it isn’t easier to borrow more from the same bank with a spotless track record? Are you encountering more roadblocks with every new application?
If you answered yes to any of the questions above then you need to keep reading, you may have already reached a borrowing threshold that you weren’t aware of. Given the current property market if you are looking to grow your portfolio it is important to understand what your incremental borrowing capacity is with your current lender.
The banking system has undergone significant consolidation since the GFC (CBA/Bankwest, St George/Westpac, Macquarie Bank/Home Loans Ltd to name a few) and there have been fundamental shifts within these institutions to maximise margins (i.e. the banks profit) and minimise risk (i.e. the banks risk, not yours).
In a drive to hit all of their targets the banks are moving towards increased automation within their internal processes, and in turn they are increasingly relying on standardised rating systems and centralised credit teams to calculate your individual risk profile and ‘probability of default’. This makes the banks take a much more generic and computerised approach to assessing your individual situation.
What this means at many banks is that if you have current borrowings of more than $1M their systems may have already flagged you, and every extra dollar you borrow is going to be scrutinised much more than previously – the computers show no mercy!
Furthermore they now take the view of assessing the banking groups total ‘exposure’ to a client, and not the individual bank you are directly working with. So for example where Bankwest and CBA were previously two completely stand alone businesses, nowadays Bankwest is a subsidiary of CBA and they look at a clients combined borrowings across both banks when assessing applications. Unfortunately for the end client, the banks have different policies once your ‘exposure’ hits a certain point.
In some banks this is as low as $1M in lending, however in all cases this will be to your detriment as the end client with more hoops and hurdles to get through – if you do eventually get through them at all!
Although it might not sound like rocket science, the fact is having all of your eggs in one banking basket will work great – until it doesn’t and then you will have to contend with an inevitable glass ceiling. So if you are starting to feel a glass ceiling contact us today on 1300 88 73 28 or via reply email to discuss your options.