We used a Broker from a company recomended by a couple of highly regarded property investors and after trying to obtain funds for further investments we have found the lending institution has cross collateralised and therfore has locked up our properties equities. We can go low/no dock but if the set up was different we wouldn’t need to as yet! Any thoughts or advice?
Will need some more info to make some suggestions.
Might be best to speak to a new broker direct rather than publish too much info here – ask around for a referral.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
Same thing is happening to us. Talk to a new broker, apparently if it is a fixed interest loan and it is lower than current lending rates no penalties will apply if you refinance. I have since learned that it suits brokers very nicely to cross collateralise loans.
How would it suit a broker to xcoll? I am not being sarcastic – am genuinely curious.
Cheers,
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
X-coll is not too bad. You can just apply for a release of security for a cost of about $300.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi
Just ask for a release of security…hmmm Well i asked the NAB and they said NO.
regards
alfAlf, why did they say no? Maybe due to not enough equity in one of the properties?
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry, Rolf Latham gave a talk a little while ago that I went to, and he had stories of it costing up to $60K to uncross properties – AND it took many many months to do so….. In this instance there were quite a few properties, but even lesser numbers took a lot of time, and sometimes quite a bit of money too..[baaa]
bigmark, I think you’ll find that it suits banks nicely to cross properties – and makes it harder for brokers to find new finance if you can’t then use some of the securities…
Cheers
MelGoodbuy- a quick one- were these details explained to you when you signed up the funders docs? If not you may have a real case.
Chris Durman
Commercial Capital Finance Pty Ltd
B 07 3853 5221
F 07 3853 5256
M 0427809858
C/- Brisbane Technology Park, 1 Clunies Ross Court, Eight Mile Plains, Queensland 4113
ACN 110 082 347
CAUTION – This message may contain privileged and confidential information intended only for the use of the addressee named above. If you are not the intended recipient of this message you are hereby notified that any use, dissemination, distribution or reproduction of this message is prohibited. If you have received this message in error please advise the sender by reply email. Any views expressed in this message are those of the individual sender and may not necessarily reflect the views of the Commercial Capital Group.Terry,
We had the same problem with Colonial, had 30% equity in the property (place was valued by the valuer they would accept) and they said NO, when I questioned the decision they said “it wasn’t their policy”.
When the fixed terms come due I’ll take the loans elsewhere, mainly becasue I wasn’t happy with their unhelpful answer.
PK
A question for Purple Kiss or anyone else…..
I too have crossed collatorised. If the bank says no to (not sure of terminology) releasing the collatorised property to allow stand alone loans for the IPs; does this mean we cannot sell our encumbered property?
cheers
millyMilly- present the argument to the bank or broker as a 1st point. If you are selling and buying another, you could offer the new property to replace the one you are selling (as security). The bank can also be asked to set out in writing to you why they wont “allow” you to have the others as stand alone. The lender usually will take as mush security as is willing ot be provided at the onset, and releasing this becomes an issue.
Chris Durman
Commercial Capital Finance Pty Ltd
B 07 3853 5221
F 07 3853 5256
M 0427809858
C/- Brisbane Technology Park, 1 Clunies Ross Court, Eight Mile Plains, Queensland 4113
ACN 110 082 347
CAUTION – This message may contain privileged and confidential information intended only for the use of the addressee named above. Any views expressed in this message are those of the individual sender and may not necessarily reflect the views of the Commercial Capital Group.Cross colateralisation can be a nightmare for investors, unfortunately in a lot of cases with the right structure it could have been avoided,
Lenders by nature tend to grab as much security over a loan as possible, in some instances it may be warranted,
If your property portfolio is sitting at the high end of the loan to value ratio, and for what ever reason x coll cannot be avoided, then by ensuring the security over your mortgage is portable can help alleviate the problem of releasing security at a later date, this is achieved when the equity in the remaining investments increase.Regards
Steven
Mortgage Broker[email protected]
http://www.mobilemortgagemarket.com.au
Ph:1800 820 500
VICTORIAPLEASE note comments made should NOT be taken as specific taxation, financial, legal or investment advice. Please seek professional, specific advice.
Milly,
When we sold our PPOR which had the IP’s all cross collateised, they then took the new PPOR as the security over all the IP’s. This was at a “cost” as I was changing securities, I think it cost us $150 per property.
So at present we have one IP that is stand alone, and 3 that are cross-coll. One of the three only has itself and our PPOR as security, and that’s the one we will refinance shortly. The other two IP’s have themselves, the other IP and our PPOR as security. These two IP’s are on fixed terms so when they fall due next year then I give the bank a choice of either refinancing with only the properties as security for themselves or I’ll take the business elsewhere as each property has enough equity now to cover itself so that gives me more options. I’d do it sooner, but we are on a good interest rate at present so that’s why I’ll let them have their way for another year.
I don’t think you will have a probelm if you wanted to sell one, unless you’re other properties don’t have enough equity to please the bank, if this is the case, they may ask for cash from the sale to reduce one or more of your other mortgages to bring it within their guidelines. Also, this may mean the securites on the other mortgages have to be changed and this may be at a cost!
Each bank is a bit different so you probably need to talk to your bank to find out their “policy”.
Good Luck
PKRE MortgageHunter
In some cases brokers commission is based on the size of the loan they write. Cross collateralising gives them a bigger loan as they can include all properties they can. Happened to us. Westpac actually redid all the loans back to stand alones 2 months later. The manager at the bank told me about the commission set up. It comes down to fees and commissions!!!!Commissions we get are the same whether the loans are xcoll or not.
Simon Macks
Mortgage Broker
http://www.mortgagehunter.com.au
0425 228 985Comments may not be relevant to individual circumstances. If you intend making any investment, financial or taxation decision you should consult a professional adviser.
siacci
The loan will not be larger just because of x-coll, the security base would be larger, but it would not affect the loan, so therefore the commissions won’t change either.
Terryw
Discover Home Loans
North Sydney
[email protected]Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
The only person benefiting from cross-collateralising is the lender taking the security. Having multiple properties provides them with the opportunity to sell the most ‘saleable’ property in the event of default (taking possession).
I think people are mad to cross-collateralise unless there is a security type issue that requires it to increase the LVR.
Robert Bou-Hamdan
Mortgage AdviserM: 0414 347 771
E: [email protected]
W: http://www.mortgagepackaging.com.auFREE Finance-Related Newsletter: See – http://www.mortgagepackaging.com.au/index_files/newsletter.htm
Comments made are of a general nature and should not be construed as individual advice.
© 2004 Mortgage Packaging Pty Ltd
You must be logged in to reply to this topic. If you don't have an account, you can register here.
