Splitting Lending Across Banks
Now this is a topic banks will not discuss with you – splitting lending across banks. The bank will try whatever they can to keep all of your banking, lending, insurance and investments like KiwiSaver, as they make money from each of these things. They love to have control, they know that if you keep all your products with them, you are more likely to stay with them even if there are problems or poor service.
Don’t Put All Your Eggs In One Basket
Don’t put all your eggs in one basket, this saying has been around since 1605, it was around well before New Zealand had it’s first bank which was in Petone in 1840. The real meaning of this is that one should not concentrate all efforts and or put all your resources in one area as you could lose everything. This saying definitely applies to lending. However, Kiwis will ignore this advice and will keep all their lending with the bank.
Is it a good idea to keep lending all together?
No it is not a good idea to keep lending together with one bank. The banks make more money if you have all your banking with them, they will have control so it is definitely not a good idea.
Banks will offer incentives to attract you
Banks will offer incentives to bring all of your business to the bank, it may seem attractive to you and make the decision easier; however you can be sure that the bank has considered things and calculated the cost to the bank and decided that it is worth giving that incentive to get your business. They are not doing it to be “nice” but are giving incentives so they can make more money over the longer term. The banks also know that they have less risk and more control when they have all of your banking.
Multiple Properties
If you have multiple properties, the banks will link the properties together. You will need the banks permission to sell one of the properties, so ultimately the bank has the say in what happens to your properties. If you are a business owner, the bank will want to have both your business banking and your home mortgage. The bank will charge higher fees for business banking and higher interest rates as there is more risk for self employed people and they love to reduce the risks by having security over your home too.
In many cases the business loan that you might think you have and are being charged for is really no more than a home loan in disguise. The bank have used your home as security but still get away with charging you the higher interest rates because they have called it a business loan.
You need to consider what is best for you and it is almost certainly not putting all your eggs in one basket.
Any good mortgage adviser will suggest splitting lending across banks and not having your business banking with the same bank that your mortgage is with.
What you should have;
- A separate bank or lender from your main personal and business banking for your mortgage on your home
- Separate banks for your home and any rental properties
- Separate banks for your main business banking as well as your mortgage
- Separate lender for insurances and investments (including KiwiSaver) as the banks are not generally good with these, so why would you do these with the bank?
- You should still look at changing your banking and splitting lending across banks.
If you have everything tied up with the same bank, they do make it hard to split up your lending in particular. They will probably give you some lame reasons why you should keep everything with the bank. This means that some people will give up and leave things as they are and that’s exactly what the bank wants.
I can help you
As a mortgage adviser, I have seen the problems created from having your banking and lending with the same bank and linked together. I’ve seen people forced by the banks to sell properties at the wrong times, we’ve seen banks demand the proceeds from property sales, I’ve seen people unable to sell because the banks don’t allow it and I have seen banks take money from one bank account to fund a shortfall elsewhere.
The actions that banks can take often cause chaos for the people involved, but the bank is legally able to do these things because the documents that you have signed allow it. The bankers may say that they are looking after you, but the fact is that the banks will assign the task to a department that is only interested in looking after the bank.
Moving a bank account, your insurances and investments (including KiwiSaver) are normally quite easy, but sometimes it’s not so easy splitting lending across banks.
I am trained in the process of doing this and can help move things away from a single bank.
Contact me or fill in the form below so I can help you.
