A MORTGAGE BROKER'S VIEW- Is your bank over secured?
A Mortgage Broker’s View - Is Your Bank Over Secured?
Banks like having plenty of security, it’s what underpins any major finance application and gives them something to sell if things go ‘pear shaped’. What I often see happen with clients is the bank holds more security than is necessary. A bank is unlikely to be proactive and tell you they want to release a mortgage over one of your properties!
If you are a business owner or property investor for example with multiple properties, it’s worthwhile getting your structure and security position reviewed. It could be that existing securities have increased in value in such a way that a property could have its mortgage released.
For example we recently helped restructure a client with three residential properties worth $210k, $235k and a $350k family home. His lending with the existing bank was $295k. The loan to value ratio was a low 37% so the bank had far more security than it needed. So we ‘ring fenced’ the $210k and $235k properties with the $295k debt. We had the mortgage on the $350k family home released thus keeping it safe should anything untoward happen with his business. It also allowed us to use another bank with the $350k property for any future investment or business plans. There was also equity in the $210k and $235k properties if we needed it as the loan to value ratio changed to 66%.
Your family home could be the first property you look to release if your overall loan to value ratio is low over two properties or more. If you get into financial strife and the bank holds multiple properties, the most sellable asset could be the first one sold in a mortgagee sale.
Written by Craig Pope, Mortgage Broker
For a free mortgage strategy discussion call Craig Pope on 0275 476 739