Multi-bank lending structures (also known as split banking), is when you spread your lending across multiple banks.
It’s a type of structure that mainly suits borrowers with multiple properties. When it comes to building wealth through property investment, having control over your financial situation is key.
If you have all of your properties, including your home with one bank, that bank will take an umbrella security over all of them.
Even if you have different loan accounts, the bank secures the debt over all assets held with them, which gives them a considerable amount of decision-making control.
You might think having all your eggs in one lender’s basket is convenient, but it can be a risky strategy. In this article we will see how multi-bank lending can enhance your equity position, improve your leverage capabilities and protect you from unforeseen financial setbacks.
Maximise Borrowing Options
Splitting your lending across multiple lenders can potentially boost your borrowing power.
Different banks have varying lending criteria, products and interest rates. Some can offer better terms for apartments, while others treat rental income differently.
By working with a Mortgage Adviser to tap into a wider range of options, you can secure more favourable terms for different loans, which will allow you to access further lending and potentially make another purchase.
Spreading Financial Risk
Apart from maximising your borrowing options, you can also protect your property portfolio by using multiple banks. This is especially important when it comes to selling off properties in the future to fund your retirement.
If you have all of your properties with one bank and you sell one, the bank can claim full proceeds from the property sale to pay off other mortgage debts.
A “sale” will trigger a reassessment of your borrowing and if you are in retirement phase and your income has dropped, the bank still needs to make sure you can afford the remaining borrowing on the other properties.
It might be great that your debt will decrease when you repay the bank, but the issue arises when you thought you were going to have access to those funds from your “sale” and now you don’t.
Using multiple banks will help to avoid this situation. By spreading your risk across different lenders, you gain more control over your sale proceeds and reduce the chance of unexpected financial setbacks.
Customised Banking Solutions
Working with multiple banks gives you more flexibility and tailored solutions. If one lender can’t meet your specific needs, you have alternatives. This is especially helpful when your financial situation changes or you have unique requirements.
To sum it up, multi-bank lending structures (or split banking), is a smart strategy to consider for property investors looking to build a stronger, more resilient portfolio. Adopting a multi-bank structure has a significant impact on safeguarding your property investments and boosting your financial flexibility.
By spreading your risk across different lenders, you gain more control over your assets and open up new opportunities to maximise your borrowing potential. This approach not only protects you from the whims of a single bank’s policy change, but also allows you to tap into a wider range of customised banking solutions that can better suit your unique property investment needs.
Making sure your multi-bank structure is set up correctly can be tricky and time-consuming, so it’s a good idea to reach out to a Mortgage Adviser for guidance. By taking this proactive approach, you’ll be better equipped to navigate the ever-changing property investment scene and set yourself up for long-term success. Feel free to reach out if you need a hand with your lending structure.
Applications for finance are subject to meeting the lenders criteria, terms, and conditions.
