I always laugh when I see the advertising for banks where they say “Do You Know Your Bank Manager’s Mobile Number? If Not, Why Not?” or when they say things like “Oh You’re Eligible For Our Executive Package” etc etc. Make no mistake – banks are a business and they will do anything to lock you in to them and keep you loyal.

But the problem with that for real estate and property investors is that staying with the same bank is a fatal mistake. You see the reality is that you can only really have four properties with one bank and then they will stop lending to you. What a lot of people don’t know is that every time you get a mortgage the bank takes out mortgage insurance against YOU. Because you are a risk to them. If you go under they lose out. Some real estate and property investors think it is only when you borrow 80% or more, but actually they always do it, it’s just you who pays the bill if it’s an over 80% lend.

The problem is that there are only four mortgage insurers in Australia, and they will only insure one mortgage per client per bank. So when you get to four properties you are uninsurable and the bank will stop lending you money.

To make matters worse, other banks won’t lend you money either because you will be too exposed to the first bank and they’ll will see you as too great a risk. ie: If you fall over you will burn them first because you have only one property with them as opposed to the first bank to whom you have four with.

Morale of the story: Always use a separate bank for each property.

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