02 4978 8600
1300 137 656
Blog   »   October 2015   »   Do Banks & Building Societies Know?

Do Banks & Building Societies Know?

Do Banks & Building Societies Know?

I am prompted to blog after a number of incidents that have occurred over the past few months.

I am unsure if lenders out there are ignorant, uncaring or plain misleading.

It is incomprehensible why banks & building societies would encourage clients to add a car purchase onto their home loan for a number of reasons:

  • Car loan rates are similar or in some cases cheaper than home loans
  • Most car loans are of a fixed rate and term whereas a mortgage rate goes up and down
  • Most people will replace their car  within 5 years of purchase
  • On a 30 year home loan you may still be paying cars off that have been replaced a decade or more ago.
  • If you can’t afford to finance a car over 5 years with or without a residual, you can’t afford it, so don’t
  • A $35,000.00 car over 30 years will cost you $71,460.00 or $36,462.38 in interest (based on current rates)
  • The same car on a chattel mortgage with a 25% residual will cost you $39,943.00 or $4,943.00 in interest.

Use a broker, we are generally cheaper, have better knowledge and are governed by legislation. We have to have sufficient education, completed finance courses, constantly receive ongoing training and have to have experience in the industry to be a broker plus we are insured and governed by a number of government and semi government organisations.

Most importantly, we are generally in small business, don’t have the anonymity of a large corporation, really value your business and we want to do the best for our client.

We at Hunter Business Finance commenced trading in 1988 – 27 years of doing the right thing by clients.

My Second Bug Bear with Building Societies and Banks

Security

For all of you looking at buying a second property, here are some examples of what to be aware of.

  • First, if you approach a broker, he / she may have as many as 20 different lenders to choose from
  • You are not governed by one lender’s policy or the interpretation of those policies by, in many cases, an inexperienced employee / novice
  • Your broker has replaced what used to be the bank’s middle management and has the knowledge  to assist you
  • Brokers are “employed” by you and want to look after your interests
  • Brokers are paid by the bank at no cost to you for suppling real estate deals to the bank
  • Bank employees are employed by a bank and need to look after the bank
  • Internet applications are fine but are you given all the relative information, is there any other way of arranging the security?

A new client looking for finance for a new car had just finalised a commercial loan with his bank was asking about what his bank had done.

He owned his home outright worth approximately $700,000.00 and was buying a commercial warehouse for $350,000.00. A deposit of $70,000.00 was given with the loan of $280,000.00 being required.

The bank took a first mortgage over the client’s home, a first mortgage over the commercial property and a charge over his company.

This client had been in business for over 12 years and had financials which confirmed he could meet the new commitment plus with the purchase of the warehouse, rent was extinguished.

This excessive taking of security is a massive “over kill” and will cause this client issues down the track with the open ended charge the bank put on the client’s business.

Why did they do it? Because they could.

As a broker we know that commercial loans need additional security when the loan exceeds 70% of the value however:

  • Simple solution, use the house only and maybe a cheaper rate would be applicable
  • Use both properties a dearer rate applies because of the commercial component
  • Did the bank do anything wrong? NO!!!

We at Hunter Business Finance would have put up this deal with one security only, not three, and it would have been approved.

This is not a bank and building society bashing exercise it is to point out the differences you get when you use a broker such as Hunter Business Finance from that of relying on one institutions sole advise.

 

Posted: 28/10/2015 1:10:48 PM by Hunter Business Finance | with 0 comments

Comments

Blog post currently doesn't have any comments.



 Security code
We'll make getting the finance you need easy
Call us now on
02 4978 8600
1300 137 656

Search Blog Posts

Categories

Subscribe

Subscribe to the blog to receive email notifications of all new posts: