When lending policies change, it doesn’t always mean your financial strategy should change with them.
Recently, we assisted a business owner whose commercial lending arrangement was due for review after completing a five-year interest-only period on their commercial property loan.
The client had originally purchased a commercial unit for their business using a 15-year loan structure, with the bank agreeing to an initial five-year interest-only period. As the review date approached, the lender’s current policy required the loan to transition from Interest Only repayments to Principal and Interest repayments.
While this may appear to be a standard process, it presented a challenge.
Understanding the Bigger Picture
The client also had a residential home loan that was being repaid on a Principal and Interest basis.
Their preferred strategy was clear:
- Continue making Principal and Interest repayments on their home loan.
- Retain the Interest Only structure on the commercial property loan.
- Direct surplus cash flow towards reducing the non-deductible home loan debt sooner.
From a wealth-building perspective, this approach made sense. While every client’s circumstances are different and tax advice should always be sought from a qualified tax professional, the client recognised that reducing non-deductible debt was a priority.
Exploring Alternative Solutions
Rather than accepting the lender’s revised repayment requirements, we reviewed the client’s objectives and explored options available across the lending market.
Through our analysis and lender negotiations, we identified a solution that allowed the client to:
✅ Maintain the Interest Only structure on the commercial loan for a further five years.
✅ Preserve cash flow flexibility.
✅ Continue aggressively reducing their home loan balance.
✅ Align their lending structure with their long-term financial objectives.
The Result
By securing a lending solution that supported the client’s preferred repayment strategy, the client is projected to save approximately $24,750 over the next five years compared with the alternative structure initially presented.
More importantly, the strategy provides greater control over cash flow and allows the client to focus on reducing personal debt while maintaining ownership of their commercial premises.
The Takeaway
Many business owners assume that when their lender changes a policy or a loan review occurs, the available options are limited.
In reality, lending policies differ significantly between lenders. A loan review can often be an opportunity to reassess your overall strategy and ensure your lending structure continues to support your business and personal goals.
At Australian Finance Partners, we believe lending solutions should be built around the client’s objectives, not just the bank’s policy.
If your commercial or investment loan is approaching review, it may be worth exploring whether a more suitable structure is available before accepting the default option.
Disclaimer: This case study is based on a real client scenario; however, individual circumstances vary. Savings quoted are specific to this client and should not be considered indicative of future results. Australian Finance Partners does not provide tax advice. Clients should seek independent taxation and financial advice regarding their personal circumstances.