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Split banking – maintaining property loan facilities across multiple banks rather than concentrating everything with a single lender – represents a sophisticated strategy that many experienced New Zealand property investors employ. While it adds some administrative complexity, split banking provides significant benefits including reduced concentration risk, improved negotiating leverage, greater flexibility, and enhanced borrowing capacity over time.
At Luminate Financial Group, we help investors implement split banking strategies that optimize their portfolio positions. Many investors default to single-bank relationships without considering the long-term advantages of strategic diversification across multiple lending institutions.
What Is Split Banking?
Split banking means deliberately spreading your property loans across two or more banks rather than holding all mortgages with one institution. For example, an investor with four properties might maintain two properties with Bank A and two with Bank B, or distribute them across three banks.
Key Benefits of Split Banking
Reduced Concentration Risk
The Problem with Single Banks: If your sole bank tightens lending criteria, experiences regulatory issues, or changes appetite for property investment, your entire portfolio faces exposure. Banks can decline additional lending, demand equity injections, or refuse refinancing.
Split Banking Solution: Multiple banking relationships mean one bank's policy changes don't jeopardize your entire portfolio. Alternative banks provide ongoing options.
Enhanced Negotiating Leverage
Competitive Tension: Banks compete for business. When multiple banks know you have options, they offer better rates, terms, and service to retain or gain your business.
Rate Negotiations: "Bank B is offering 6.2% – can you match?" becomes a legitimate negotiation tactic when you genuinely have alternatives.
Improved Borrowing Capacity
Different Assessment Criteria: Banks have varying lending criteria, risk appetites, and serviceability calculations. Property Bank A declines might suit Bank B's criteria perfectly.
Expanded Options: When acquiring properties, having pre-existing relationships with multiple banks provides more lending options and increases approval likelihood.
Greater Flexibility
Property-Specific Lending: Split banking enables matching specific properties to banks with particular strengths. Bank A might excel at apartment lending while Bank B prefers standalone houses.
Refinancing Freedom: Individual properties can be refinanced between banks without restructuring entire portfolios, providing flexibility as circumstances or opportunities change.
Optimal Split Banking Structures
Two-Bank Strategy
Most common approach for portfolios of 3-6 properties. Distribute properties roughly evenly between two major banks. Maintains simplicity while capturing key split banking benefits.
Three-Bank Strategy
Suitable for larger portfolios (6+ properties). Provides maximum diversification and competitive tension while remaining administratively manageable.
Avoiding Over-Fragmentation
Spreading portfolios across 4+ banks creates excessive administrative complexity without proportional additional benefits. Two to three banks represents the optimal balance.
Implementation Strategies
Starting Fresh
New investors can implement split banking from the start by deliberately choosing different banks for first and second property purchases, establishing relationships early that facilitate future lending.
Transitioning Existing Portfolios
Investors with concentrated single-bank portfolios can gradually diversify by refinancing individual properties to alternative banks as fixed-rate periods end or opportunities arise, and directing new acquisitions to different banks.
Choosing Which Banks to Use
Consider Bank Characteristics
Major Banks vs Second-Tier: Major banks (ANZ, ASB, BNZ, Westpac) offer competitive rates and comprehensive services. Second-tier banks (Kiwibank, TSB, Co-operative Bank) sometimes provide more flexible criteria or personalized service.
Investment Property Appetite: Different banks have varying enthusiasm for investment lending. Some actively court investors while others are more conservative.
Rate Competitiveness: Compare rates across banks regularly, though rates alone shouldn't drive decisions – criteria, service, and flexibility matter too.
Working with Mortgage Brokers
Specialist mortgage brokers understand which banks suit different situations and can facilitate split banking strategies efficiently. They maintain relationships across multiple banks and understand current lending criteria and appetites.
Managing Split Banking Relationships
Administrative Considerations
Multiple Online Banking Platforms: Accessing different banks' systems requires managing multiple logins and platforms.
Separate Direct Debits: Each bank requires direct debit setup for mortgage payments from appropriate accounts.
Multiple Points of Contact: Different relationship managers across banks mean multiple communication channels.
Simplification Strategies
Use mortgage brokers as single points of contact coordinating multiple bank relationships, consolidate property accounts where possible, and implement systematic record-keeping across all facilities.
Common Concerns and Solutions
"Won't banks offer better rates for larger portfolios?" Occasionally, but the rate benefit (typically 0.1-0.2%) rarely outweighs split banking's flexibility and risk management benefits.
"Isn't it too complicated?" Initial setup requires effort, but ongoing management is straightforward. Benefits significantly outweigh modest additional complexity.
"Will it affect borrowing capacity?" No – total borrowing capacity depends on your financial position, not how many banks you use. Split banking often enhances capacity by providing more lending options.
The Luminate Financial Group Perspective
At Luminate Financial Group, we recommend split banking for most investors once they own 2-3 properties. The diversification, negotiating leverage, and flexibility benefits substantially outweigh minor administrative complexity.
Single-bank concentration creates unnecessary vulnerability in your portfolio structure. Property investment success requires thinking long-term and strategically – split banking exemplifies this approach.
For investors building substantial portfolios, split banking isn't optional sophistication – it's prudent risk management and strategic positioning that facilitates continued growth and protects against concentration risks.
Implement split banking gradually and deliberately. You don't need to restructure everything immediately. Begin with next acquisition and build diversified banking relationships over time. The strategic advantages compound throughout your investment journey, making split banking one of the higher-return low-complexity strategies available to property investors.
