Banks and lending at the moment !

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Forums › Finance and wealth management › Banks and lending at the moment !

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Smpl Mnmlst
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#3039981 21-Feb-2023 11:50

wellygary:

martyyn: I'm on my phone so I'll try to answer a few questions.

Broker is now on the case with the remit to get the best deal regardless of provider.

We are 51, We will be borrowing 100% of the purchase price but it still comes in at 60% of the property values. Surely they aren't expecting FHB to have a 40% deposit.

But you aren't FHBers...

You simply don't fit through the standard lending rules, because

a) You will be 65 before the mortgage term ends,

b) The mortgage will need to be encumbered across multiple properties,

and when you add on CCCFA, it is very easy for the Computer to say no...

Yes - total non sequitur there.

Sometimes I just sit and think. Other times I just sit.

johno1234

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#3039989 21-Feb-2023 12:12

Handsomedan:

As a banker (although not in the small business/personal/lending space), it simply amazes me that there are banks willing to see customers who are loyal, consistently show an ability to service and have enough equity leave them. And they don't bat an eyelid.

This is why I left BNZ after 20+ years. They had zero interest in client relationships. So I moved to Kiwibank and the manager of the branch and I chat from time to time. He knows exactly who I am and remembers our discussions, understands our plans etc. And he's been there since at least 2017 since I've been there. KB lack of support for ApplePay is testing my patience but I can't see myself going through the hassle of a bank change while I have a manager who I know well.

eracode

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#3039992 21-Feb-2023 12:24

IMO it’s a cliche but true that the quality of the service that personal clients receive from their bank is almost wholly dependent on the quantity of the relationship they have with with just the person they deal with - and on that person’s experience, intelligence, integrity and interpersonal skills. It rarely has much to do with the bank’s policies and practices as a whole. In that respect I believe there are very few differences between the banks.

A skilled and experienced personal banker can often find a way to make a borderline proposal work - whereas a less experienced or junior banker might just see that it doesn’t immediately fit the outline policy and say nah.

When someone says “X Bank was useless so I went to Y Bank and they’re brilliant” it’s really a case of “My banker at X was useless so I went to Y and have found someone brilliant to work with”.

Sometimes I just sit and think. Other times I just sit.

concordnz

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#3040002 21-Feb-2023 12:49

wellygary:
martyyn: I'm on my phone so I'll try to answer a few questions.

Broker is now on the case with the remit to get the best deal regardless of provider.

We are 51, We will be borrowing 100% of the purchase price but it still comes in at 60% of the property values. Surely they aren't expecting FHB to have a 40% deposit.

But you aren't FHBers...

You simply don't fit through the standard lending rules, because

a) You will be 65 before the mortgage term ends,

b) The mortgage will need to be encumbered across multiple properties,

and when you add on CCCFA, it is very easy for the Computer to say no...

As mentioned previously, banks (under their Responsable Lending requirements) are likely to limit the Mortgage term to end when the client is 65yo (so the term max is likely to only be 15 years)
They are also required to calculate servicing on P&I (Principle & Interest repayments) Being encumbered against multiple properties is not normally a problem (unless one of them is a Commercial / Industrial unit which adds complexity and reduces numbers)

But the above has highlighted two other 'Problems' the OP has.
1) = No Deposit. (a deposit shows evidence that you can live within your means, and have the ability to Save/repay based on your existing income.)
Having no deposit is a bad sign to banks (& its also why to don't take into account 'deposit gifts' from Family or friends) - [you havnt shown the ability to save based on your current incomes, so your risk profile is significantly higher in anybodies eyes]
(yes, this is very hard to show, when you are investing your 'savings' into a business - but if the business is being run profitably - it's cashflow reserves and profitability should be growing year-on-year with the increased equity)

2)The asset which is being purchased.......
Will it contribute to the growth of the businesses? (or is it just a 'deadweight' of additional expences.....)

If it's an asset which will contribute to business growth, & you can show this by accounting forecasts done by a professional Accountant, the banks 'can' take a percentage of this growth into account in their serviceability calcs (I think they factor it down to 40% on a forecast iirc)

If its just a 'deadweight asset' - with all the costs and contributing nothing to the business growth - then you will need huge serviceability, before banks will consider it (specially if you are financing it 100% on 'banks money')

You may be able to look at 2nd teir Lenders, to make it happen, I've used them in the past, yes the costs are higher and it takes many weeks to work through their risk assessment processes - but if you want the deal to happen, you pay the price. *shrug*

I suspect your Mortg Broker will be doing well to get 'any deal' let alone get 'the best deal'.....
He's going to be spending hours and hours on this for you.
(I hope you have provided him with the business forecasts already, he will need these)

eracode

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#3040004 21-Feb-2023 13:00

@concordnz Quote: “But the above has highlighted two other 'Problems' the OP has.
1) = No Deposit. (a deposit shows evidence that you can live within your means, and have the ability to Save/repay based on your existing income.)”

Really? It appears that the OP has existing home loan debt so it is unlikely that they will have a deposit to apply to the purchase of a further residential property. It wouldn’t make sense and would be an inefficient situation for them to have a deposit while being a borrower. I doubt that their bank would expect a deposit in these circumstances - so not having one is not a black mark.

Sometimes I just sit and think. Other times I just sit.

concordnz

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#3040008 21-Feb-2023 13:12

The great thing about computers, (and risk profiles) is they don't care if something is 'efficient or not' *shrug* - the numbers just are what they are, and anything outside this requires 'careful analysis'

I've been through it myself a number of times.
There are ways you can 'work the system' to legitimately show your lending profile in a better light(to their algorithms) - but that's not a discussion for this thread. (and requires planning 6mo-12mo in advance)

networkn

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#3040042 21-Feb-2023 13:39

We are similar to the OP, we would be (we believe) a banks wet dream, but our Bank (Kiwibank) who started off doing anything and everything for us at the drop of a hat and become progressively harder and harder to deal with. Even borrowing relatively small sums of money (for us) seems to involve everything under the sun including 6 times a day DNA tests. We have been with them for 20 years, ALL our incomes and debt is with them bar maybe a relatively small amount on CC's elsewhere and it's a nightmare.

We are in the fortunate position we will be mortgage free shortly, and then I'm gone from KB and never looking back. The last 10 years with them has *sucked* but the amount of money it would cost to change, given trusts etc and the fact we have always had the lowest rates, has kept us there. Now they aren't even giving us preferential rates, we could be anywhere.

The problem for Kiwibank is they aren't a 'real' bank. They don't really get Small Business Ownership and the relationship with personal banking.

Having said that, IME it has a lot do to with the person you deal with. We have had some great experiences with people at Kiwibank, and some appalling ones.

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martyyn

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#3040053 21-Feb-2023 14:12

@eracode
Yes, we hope to end up with three properties.

@wellygary
That's a very good point, I hadn't thought of the term needing to be 15 years given our ages.

@johno1234
Yes, having a relationship with someone at the bank would be nice. But I only need someone every two or three years and we haven't had anyone stick around for that long.

@concordnz
As someone else has pointed out. The reason we don't have a deposit is because there is no point. We put everything against our existing mortgage.

But you raise points I have been thinking about with the new property. Is it a dead weight? I don't know. We currently rent an office but have been given notice. Anything else of comparable size is three to four times what we pay now. Commercial property around here is scarce and what is available is either falling down or way too big. So rather than continue to pay someone else we want to buy our own space. We will still be paying considerably more than we are now, but we'll be paying our own mortgage, not someone else's.

Both our accountant and broker have said we should be looking to purchase a property and both are confident we will get the lending we require from somewhere other than KB.

We're not trying to "work they system" just access the capital we have in our existing properties.

@networkn
Yep, we're currently with KB, so similiar issues to yourself.

networkn

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#3040054 21-Feb-2023 14:13

martyyn:

@networkn
Yep, we're currently with KB, so similiar issues to yourself.

That explains everything, honestly.

All banks are a bit difficult to deal with, but they are the worst because they never really 'got' their business side setup properly.

Run away is my advice, I've seen zero evidence of improvement in that area despite promises for more than 10 years.

concordnz

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#3040062 21-Feb-2023 14:32

@martyyn
The property won't be considered a 'deadweight' if you are achieving cost savings from moving out of elsewhere. That 'savings in office rent/lease will increase your serviceability.
(I totally agree with your thought process/intention to pay into your own property rather than continuing to pay someone else.)

If it's a Commercial property you are buying - the lending criteria is tougher, - Banks only lend 60% iirc, on the base property.
The other '40%' would have to be borrowing against your main house & Rental property. (hopefully not pushing them over their individual 40% & 20% thresholds.)
.... It becomes quite a 'maths calculation' when you are spreading across multiple 'types' of properties - A spreadsheet can come in handy when you are doing the numbers for this type of thing. :)

(When I say 'work the system' I don't mean this in any kind of sneaky or dishonest way, simply structuring your finances to make it easier for banks to lend to you.) - & yes I fully understand that you are simply wanting to access capital in your existing properties.

eracode

Smpl Mnmlst
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#3040071 21-Feb-2023 15:05

martyyn:

@eracode
Yes, we hope to end up with three properties.

Earlier I asked if the second property was commercial - thinking that was the new one to locate your businesses in - and you said no. Now it turns out that you will end up with three properties. Is the third one a commercial property and are you giving the bank a mortgage over all three properties?

Sometimes I just sit and think. Other times I just sit.

johno1234

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#3040079 21-Feb-2023 15:10

networkn:

We are similar to the OP, we would be (we believe) a banks wet dream, but our Bank (Kiwibank) who started off doing anything and everything for us at the drop of a hat and become progressively harder and harder to deal with. Even borrowing relatively small sums of money (for us) seems to involve everything under the sun including 6 times a day DNA tests. We have been with them for 20 years, ALL our incomes and debt is with them bar maybe a relatively small amount on CC's elsewhere and it's a nightmare.

We are in the fortunate position we will be mortgage free shortly, and then I'm gone from KB and never looking back. The last 10 years with them has *sucked* but the amount of money it would cost to change, given trusts etc and the fact we have always had the lowest rates, has kept us there. Now they aren't even giving us preferential rates, we could be anywhere.

The problem for Kiwibank is they aren't a 'real' bank. They don't really get Small Business Ownership and the relationship with personal banking.

Having said that, IME it has a lot do to with the person you deal with. We have had some great experiences with people at Kiwibank, and some appalling ones.

All the above is true but I am absolutely certain that everything you didn't like about KB will be as bad or worse with your next bank.

The exception is that some banks have "private wealth managers" or "personal bankers" etc for high net worth individuals. So if you are quite wealthy, or earn a particularly high income, then the bank will ensure you have a personal contact available who knows how to grease the wheels.

johno1234

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#3040081 21-Feb-2023 15:11

networkn:

martyyn:

@networkn
Yep, we're currently with KB, so similiar issues to yourself.

That explains everything, honestly.

All banks are a bit difficult to deal with, but they are the worst because they never really 'got' their business side setup properly.

Run away is my advice, I've seen zero evidence of improvement in that area despite promises for more than 10 years.

The reason *all* the banks are hard to deal with (for mortgages and loans) is the responsible lending legislation and other banking rules that have come into force over the last decade or so.

wellygary

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#3040082 21-Feb-2023 15:11

networkn:

That explains everything, honestly.

All banks are a bit difficult to deal with, but they are the worst because they never really 'got' their business side setup properly.

Run away is my advice, I've seen zero evidence of improvement in that area despite promises for more than 10 years.

This,

KB's Business banking is pretty thin and vanilla,

Given the "bespokeness" of what you are needing in terms of a product it is simply beyond them... move on..

martyyn

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#3040105 21-Feb-2023 15:59

eracode:

martyyn:

@eracode
Yes, we hope to end up with three properties.

Earlier I asked if the second property was commercial - thinking that was the new one to locate your businesses in - and you said no. Now it turns out that you will end up with three properties. Is the third one a commercial property and are you giving the bank a mortgage over all three properties?

Sorry, I must have not explained it very well. The potential purchase is not commercial but we fall below the requirements for resource consent to run a commercial property from it.

We currently have our family home and a rental.

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