Property values falling… How could this affect me?
Question of the Month:
“A colleague has been asked by his bank to reduce his loan with them, by paying it down with some cash he has. This is due to the decrease in his property values. Could something like this happen to me?”
Good news for our client – he is in a position where he should never receive such a call. Their friend however, may need to consider the below and have a professional negotiate with the bank on their behalf. They may also need to refinance with another lender to retain their cash.
When it comes to money – prevention is better than a cure!
- NO cross collateralisation – insist all loans are siloed or single security.
- Understand the products on offer – some products are secured by your entire property portfolio with the bank, even your family home!
- Check before you sell – you may find that expected sales proceeds are retained by the bank to offset a drop in value on your portfolio.
- Maximise mortgage insurance waiver – when you purchase each property, ensure you borrow up to the maximum available (for it’s value). This minimises equity you need to use from other properties.
- Brokers protect you – lenders use many methods to value your properties, a broker’s role is to use these policies to protect you.
- Ask questions – why has a particular product/structure been recommended? Often restructures are required due to incorrect setup, usually done for convenience or time constraints. This may cause unforeseen issues at tax, divorce or sale time.
- Some products require annual income/asset reviews – check if this is the case for you. I have seen several cases where Doctors have been asked to repay loans, simply due to a brief change in circumstances.
- Everyone requires tailored banking and finance advice – ensure that the person assisting you has made all the necessary enquiries into your needs and provides a recommended plan to meet them.
If the above rings alarm bells for you, seek a second opinion.
Remember, you can always call Medical Finance Detective, on 9289 7777.