6 key things borrowers forget when managing their home loans.

1. Banks’ cross securitise property
   Meaning if you own multiple properties and have all the lending with one bank, chances are they are ‘cross securitised’. So, all the loans are secured against all the properties. Whilst you may align different loans with different properties, the bank looks at the overall picture. For example, let’s say you wanted to sell a $600k rental property, and you originally borrowed $300k and you have other loans and properties with the same bank. When you sell, you will not automatically be able to hold back $300k in cash, unless already negotiated with the bank. The bank will take all the sale proceeds (less lawyer/agent fees) to pay down $600k of lending (of your choice). It pays to get impartial advice from a mortgage adviser on how best to approach this and give you more flexibility.

2. Checking your loans to see if any are floatingT
   his is an area probably costing a lot of borrowers in interest who don’t actively manage their home loans. If a fixed rate loan has reverted to floating, it will likely be a lot higher rate than a fixed rate and have no discount applied to it (if eligible).

3. Checking when loans’ fixed rates are due
   Following on from point 2, make sure you diarise when fixed rates are due. Most banks will allow you to lock in a rate 30-60 days out from the expiry date. If rates are rising, breaking a fixed rate, and locking something sooner rather than later may be worth doing to give you some surety in uncertain times. Talk to your mortgage adviser if this is worth doing.

4. You can split loans across different fixed rate periods
   You don’t have to have all your lending on one fixed rate. You can split them into different rate periods. The advantage of splitting loans is that it cushions volatility as not all your lending is just on one rate term. It means rate volatility is less likely to affect you with making small rate decisions say every year than every couple of years. So, for example, you could split your loan into three portions of 1 year, 2 year and 3 years fixed. Of course, some borrowers may also have a smaller portion on floating or revolving credit for extra payments and re-draw ability.

5. A rental property mortgage can be solely secured against family home, or split with two banks
   Extending on from point 1, if you have a lot of equity, the loan for a rental property can be raised just against the family home. For example, if you have a one million dollar house you live in, with no mortgage, and wanted to buy a 600k rental, you could raise that 600k just against your owner occupied house and pay cash for the rental (the rental then has no mortgage on it). For accounting purposes that 600k loan is still attributed to a rental purchase. Alternatively, you could raise the deposit (35%) using the family home with one bank and use a different bank for the rest of the purchase (65%). Thus, giving you more flexibility and not letting one bank have a hold over more than one property.

6. Don’t leave things till the last minute
   Borrowing money these days is complex and can involve a lot of paperwork. Even a simple refix and/or restructure of your home loans can involve time, paperwork and following a process. Leaving things till the last minute can cost you if rates are moving upwards quickly or mean missing out on a house purchase. If you are thinking about buying a property or reviewing existing mortgages, get in touch with your Craig Pope Financial mortgage adviser well in advance of any deadlines!