If you’ve just read our article Diversifying amongst multiple banks can be your best option, then you know all about the first reason that the banks WILL NEVER TELL YOU, why it can be safer to diversify.
Unless you are a high net worth client, and even then, in some cases, chances are that LIFE CAN HAPPEN.
With a background in debt collection (don’t let that scare you away), I have seen all too many times when people have experienced unfortunate life events, that have placed them in situations where they have faced losing their home or their income, or even faced bankruptcy.
No-one sets out to lose money, and no one sets out to make bad investment decisions or for their business to go under. But sometimes in life this does happen. Whether you are faced with illness, or divorce, or you are the unfortunate victim of a business partner going rogue, these events can cause remarkable damage to your cash flow and asset position.
One of the reasons that the bank wants to get their claws into all of your assets and to hold all of your accounts with them, apart from making profit on the interest on each of your loans, or the ability to use your savings to leverage banking investments (after all, the banks cant borrow and lend funds unless they hold a certain amount of cash in their grip), is because it is safer FOR THEM.
Your bank will never tell you of the powers they hold, when they have all of your properties and bank accounts under their roof.
Have you ever been overdue on a credit card or personal loan, and found that the bank has dipped into your savings account, taken all of your savings to pay the overdue bill, and left you with nothing for the week or the month?
Hopefully you haven’t experienced this, but it has occurred for many Australians.
Another scary proposition, is that if you hold multiple properties with one bank, and you become overdue on one of your mortgages, the bank can elect to “call in” all of your loans. Meaning, that even though you are only overdue on one of your property loans, they can force you to close all of your loans held with them – suggesting that you refinance, or SELL EVERYTHING.=
Now chances are, if you are behind on your payments, you are not going to be in the most rosy financial position that will allow you to simply refinance with another lender. Plus, with strict new legislation, that came into effect in 2010, under the National Consumer Credit Protection Act, it may be unlawful for another bank to refinance your debts, or you may find that your only options for refinance are through “non-conforming” lenders, whom charge interest rates 1 – 4% higher than your average banks.
If this is all starting to sound a little grim, I’ll take it back to topic – now im not talking about being deceptive here, its simply about protecting YOUR interests, instead of the banks. If for example, you hold three investment properties with three separate banks, and you fall behind in repayments on one of them, the bank can only force you to sell the ONE property which you hold with them. Your other two properties will be safe, as long as you keep up to date with your repayments with them.
The above information is a little dark, and is not something that we really want to think about, or even discuss, but unfortunately it has become a reality for many Australians whom have been hit by hard times.
If you would like to discuss your long term plans, call Bee Finance Savvy on 1300 140 554. We can liase with you and your accountant and financial planner, to help your minimise risk and to feel more secure.
You can also read about other benefits of diversifying amongst varying lenders, for the average Australian whom wants to stretch their dollar further, in another of our articles You deserve to be able to hold an investment property.
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