Recently, one of our clients purchased a piece of land and divided it into six investment properties. However, while waiting for the Title and CCC, the bank that provided their original construction loan informed them that the loan was due and they needed to repay over $700,000  as soon as possible. This forced the client to consider selling one of the properties, even though their original plan was to rent out all six properties for the long term. This made the client very disappointed and furious.

After analyzing the situation with the client, we determined that not only could they avoid repaying the loan, but they could also spread their existing construction loan across four banks. There are many benefits to doing so, 

Firstly, it can save the customer on interest. For this client, due to the large number of properties and loan amount, the bank considered it as a commercial loan, which has a relatively high interest rate. However, by spreading the loan across multiple banks, the loan amount for each bank will decrease, allowing the client to enjoy the interest rate of a regular home loan, greatly reducing the cost of the loan. 

Secondly, spreading the loan can provide asset protection, which we had a video explaining it how it works previously. 

In this case, the client only needs to use five properties as collateral, and the sixth property does not need to be used as collateral. The collateral for the fifth property is only $80,000, which can be repaid through savings or by increasing the loan from other banks. This way, the fifth property can also be exempt from collateral. Therefore, the client has two unsecured properties. If the client needs money, they can sell these two properties and keep the full fundings, which the bank cannot control. Alternatively, these two properties can be used as loan collateral, obtaining more opportunities for loan options from non-bank institutions. 

At the same time, spreading loans across banks also gives customers more flexibility. 

The loan policies and interest rates of each bank are different. The client's current bank requires them to repay the loan, while the other banks we assisted in loan restructuring can waive the repayment. This difference is quite significant! In the future, the client may face the same problem, and spreading the loan across multiple banks can increase flexibility. If one bank cannot provide a loan, perhaps another bank can. In addition, interest rates between banks may also vary, and spreading loans across banks can maximize loan capacity and avoid high interest rates when fixed rates are set in the future. 

Finally, and most importantly, this client does not need to sell their property, which can help them achieve long-term wealth accumulation and avoid unnecessary expenses such as GST, income tax, and agency fees, saving a lot of money. 

We also have another client whose residential land area is quite large. Therefore, the client decided to divide the land into three parts, retaining the front part and building two new houses in the back, all of which need to be retained for the long term.  

Although the bank did not require this client to repay the loan after the division, with our help, the client decided to restructure their loan. They only need to use one property as collateral, and the other two properties do not need to secure in bank.  

After switching banks, the client also received a substantial cashback. This client also enjoyed the benefits of asset protection and loan flexibility. 

The main difference between these two cases is that the bank required the first client to sell their property to repay the loan, while the second client did not have to. 

This is because the first case involved a larger project with a higher loan amount, which was classified as a commercial loan with a one-year term. After the loan term ended, the bank had to reassess the loan to determine if it met the requirements to be converted into a regular home loan. 

If it did not meet the requirements, the loan amount would have to be reduced. In the current strict lending environment, the client did not meet the bank's income requirements, so they had to sell their property to repay the loan. 

The second case involved only the construction of two houses with a lower loan amount, which was a regular home loan with a 30-year term, and did not require reassessment. 

The commonality between these two cases is that after the development was completed, the single property became multiple properties, and loan restructuring provided clients with asset protection, increased flexibility, and reduced loan costs. 

Therefore, if you or your friends and family do not intend to sell after the development is completed, it is recommended to seek professional from mortgage advisors to help you and them to evaluate loan restructuring options and achieve numerous benefits. 

 If you need personalized advice, please feel free to contact us. We hope today's content can inspire you. You can contact us anytime and we will provide specific advice based on your situation.  

Disclaimer: The content in this article are provided for general situation purpose only. To the extent that any such information, opinions, views and recommendations constitute advice, they do not take into account any person’s particular financial situation or goals and, accordingly, do not constitute personalised financial advice. We therefore recommend that you seek advice from your adviser before taking any action.