All Topics / Finance / LOC from cross-collateralized loan

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  • Profile photo of w8upw8up
    Member
    @w8up
    Join Date: 2010
    Post Count: 15
    January 12, 2012 - 10:32 pm

    Hi,

    I have an IP for which the loan is cross-collateralized to my PPOR with the CBA (I was a bit ignorant to the problems associated with this when took the loan out). I am now looking to obtain an LOC of ~$100K to facilitate renovation work on our PPOR  – we will likely be moving out, at least for up to 6 years to maintain CGT exemption, and using it as an IP during this time. I may also utilise the funds for deposit/costs on another IP to obtain a loan with another lender.
    Problem is, the unlocked equity is coming solely from the PPOR, but the CBA will only approve the LOC via additional mortgage over both properties, i.e. the LOC will be cross-collateralised. Is this irrelevant for the purposes of obtaining a new IP (which would be stand-alone with another lender) or I am just getting myself into a more tangled mess.

    Any advice would be appreciated.

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024
    January 13, 2012 - 12:46 am

    Hi w8

    Sorry to hear the issues you are having but i hate to say it is very common with the CBA and especially when you have the 2 loans crossed together (Existing forum members will now this is my big pet hate).

    Without solid data it is difficult to comment further but it does sound like you might be digging yourself into a deeper mess.

    Might be an idea to look at cleaning it up before you look to proceed.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Tarek BaytiehTarek Baytieh
    Member
    @tarek-baytieh
    Join Date: 2012
    Post Count: 6
    January 13, 2012 - 1:00 am

    Hi w8

    Couple of things here…

    1:  Are you sure you have a full understanding of the '6 year' rule re CGT?  If not please make sure you have your accountant explain thoroughly as it is not a simple 'rule'.

    2:  I would do what Richard has suggested and clean it up now ie make your properties stand alone if that's what you really desire.  In saying that though, 'cross-collateralising' has its place and benefits, and in fact it can be used effectively to simplify your lending structure.  If you're lucky enough to be in a position to have your properties stand alone, then all well & good.  But nothing wrong with C/C if required. 

    3:  If you're obtaing a new loan with another lender for another property, i can only assume that you're contributing a deposit of some description?  Hence what you do with CBA is irrelevant (in terms of structure).

    Take Care
    T

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213
    January 13, 2012 - 2:54 am

    Change lenders now and get it fixed up would be my recomendation.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://www.Structuring.com.au
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au

Viewing 4 posts - 1 through 4 (of 4 total)

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