What is cross collaralised ??

Devo

To answer one question at a time:

1) There are many types of Trust structures. If you hold a property with positive cash flow or run a business with cash flow then simply a Discretionary Family trust maybe suitable.
If the property you hold is negatively geared and you wish to claim the interest dedcutions then a HDT or Hybrid Discretionary Trust maybe more to you needs.

2) Most lenders wil encourage you to offer the security of your PPOR or other IP when you are borrowing the full purchase price of any new property but this is not always necessary and is certainly not required.

To give you an example i saw a client of Friday who had 4 properties with one of the big banks under their lodoc 60 scheme. He now realised the properties had gone up in value and wanted to use the available equity to purchase another property.

Of course his Bank was is reluctant to offer him any more money although he had over $500K in available equity.

Structured correctly he would have easily been able to go to an 80 / 85% lend and keep on acquiring properties.

This is just one example and i can think of many many other examples. Imagine you decide to sell a property down the track that has gone up in value becasue you wish to realise some cash for other projects. You are also aware that you will incur a CGT libaility and therefore now how much of the net proceeds you need.

At settlement you Bank turn around and tell you that they don’t lend as much as they use to in an area where you have your other IP’s they will require the cash funds to be repaid or held as security given your borrowing.

This has defeated the whole purpose of selling and now you still have CGT to pay from somewhere.

There is not enough space on the forum to relay to you all of the horrow stories i have come across in all my years in finance but as i say a little time sepnt doing in correctly will save you thousands in the long run.

As i have offered to many previous posters I am always happy to have a look at your structure at offer some recommendations. This if course is totally complementary and not a tout for business.

Cheers

Richard Taylor
Residential & Commercial Finance Broker.
Licensed Financial Planner. Ph: 07 3720 1888
[email protected]
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I wouldn’t be too concerned if you just have the one IP crossed. At the time it was probably the easiest thing to do. Just don’t do it again!

I must have missed the lesson about crosscorateral. I have my own house (just recently paid off ) X -ed with my 3 IP. How do you go about undoing this mess with no blood spilt. !!!!!!

Just be careful of who you speak to and always seek independant advice from people who have experience in investment mortgages.

I have had previous advisers actually reconmend that we take out x-collateralised loans on IPs. I have also had bank managers talk it down by saying that all banks will x-collateralise anyway and that it “dosnt really matter”.

Bottom line is dont do it. Im desperately trying to talk my mate out of it, but he thinks its his only option and the bank has made it easy for him to remortgage. He hasnt spoken to an independant advisor yet…. I think this is how most ppl fall into the trap…

BreakEven[cigar]

Break’n’Even

“I have a BMW. But only because BMW stands for Bob Marley and The Wailers, and not because I need an expensive car.”
BOB MARLEY

I may be missing the point, but from what i can gather, a LOC loan is the better option than x coll? Better to stay away from x coll if you want to build a larger portfolio?

im still confussed with what x’ing is. this is my understanding, if i want to buy an IP and i already have an ip and I borrow 80% of the cost of the new ip from itself and then i use 20% of my equity in my previouse IP to bring it up to 100%, this is bad? and is what we are talking about?

instead i should set up a LOC on the first IP and then take the 20% needed for the second ip out as cash. and put it on the second IP as a cash deposit? that way even though i know the first ip was used to fund the second ip’s 20%, the banks dont. for all they know i pulled the 20% out of the first IP and bought a lot of beer?

Thanks Terry,
What the LOC stands for if you don’t mind asking?. My LVR is more than 80%.

LOC = Line of Credit

You don’t actually need a LOC product, but just a separate loan. Even if your LVR is above 80% it is still possible, but there would be LMI costs.

Terryw
Discover Home Loans
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Yes, you should not mix business and pleasure. keep the investment loans totally separate from the home loans. Otherwise it will be a tax nightmare.

Terryw
Discover Home Loans
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