Hi everyone,
Just wanted to get everyones opinion on cross securitising properties as I've been reading a few books and they recommend not doing it as it will affect the ability to utilise equity in a property that has risen in value if another property has dropped in value.
I'm 22 and living at home with my parents and my name is on the house and mortgage on the family home, along with my parents and sister. I bought my first investment property this year in both mine and my dads name by getting a loan with our home mortgage lender and taking it to another bank as a deposit. I'm hoping to buy another property at the end of this year using more equity which I have in the family home and was trying to decide if cross securitising is a good idea or not.
With the way everything is going for me financially at the moment, I am on track to have about 70k – 80k in equity and am trying to decide whether to get another loan with my home mortgage lender and take it to another bank or go with my home mortgage lender for the new property and secure it against the family home.
Would really like to hear what people think.
Rudra
Do the search in this website.. lots of info about X-collaterised loan both risks and benefits
Grrr dont get me started on CC.
As GOM mentioned read the thread then post any questions.
Richard Taylor | Australia's leading private lender
Thanks for that guys, I did do a quick search and went through the threads on it which was quite useful. Initially we decided never to cross collaterise our investment property with our family home as a way to safe guard the family home to an extent if things went bad. However now that we have our first one and everything is going great we were going to look into all the options for structuring loans to get the second IP and wanted to know if this is a technique many people use not just with the family home and IP’s but also between different IP’s itself. Personally I’d like to keep my family home separate from any IP’s I buy, but am always open to change if it brings about better benefits.
Also Richard I visited your website and read your document on the ten disadvantages of cross collaterising and found it really interesting. I take it that represents your standpoint on this topic?
Rudra
Getting into joint loans with family members, or anyone else, may seem to be a good idea at the time, but often a few years later you realise you are trapped, unable to borrow anymore as lenders consider you responsible for the while debts, not just your share. worse, they will only take into account your share of the rent.
So in addition to all the other problems with cross sec it can hurt your serviceability alot – I did it myself many years ago.
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 Rudra
Those form only some of my reasons for disliking Cross Collaterlising securities.
In the current lending climate there are issues that i couldnt ever have invisaged occuring with lenders when i wrote that.
Been away for 2 days with the long QLD weekend and had 3 forum members email me whilst away to ask me to help them refinance to get away from the CC issues their current Bank is causing them presently.
Richard Taylor | Australia's leading private lender
I am seeing a few clients having problems selling properties which are cross securitised. Actually they can sell them, but the bank cannot or won't release the titles as the remaining security has dropped in value and in some cases the remaining loan is more than the value of the remaining property.
If only they hadn't crossed securities.
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
Hey everyone,
Thanks for the comments, it's really reinforced my decision not to cross securitise the properties I have now and any future properties.
Terryw thanks for coments about going in with family and I appreciate where you're coming from but things are slightly different. I was actually the one who wanted to invest in property but wasn't in a position to because of various factors. My parents offered the equity in our family home and so added my name to it and I'm now responsible for the loan on the family home along with my parents. With the investment property I now have only my name and my dads is on it and that again was purely so I could secure the loan to get the property. Once my dad retires which will be in the next 5 to 10 years, I will be removing him from the loan and as such it will only be in my name.
Thanks again for everyones comments.
Rudra
excuse my ignorance, but what exactly is Cross Securitising?
I think i know what it is but reading this post i think maybe not.i have 2 INV properties which i believe are cross securitised with ANZ. can someone please tell me if the following is cross securitised?
I had an INV property with fairly low LVR of about 30% with ANZ. i then purchased another INV property and borrowed with ANZ just over 100% of the purchase price to cover fees such as stamp duty.
so by using my existing INV property i avoided paying Mortgage Insurance and i didnt have to come up with any funds out of my own pocket for these fees and the deposit.
and the total LVR is under 80%.and now with ANZ under the Breakfree package i have Loan 1 which is secured under the first INV property. and i have Loan 2 which is secured by the new property i bought.
is that cross securitising? i thought it was, thats what ANZ told me anyway.
and from reading this topic……will i have problems if i go to sell one of these properties???
Hi Rudiga,
From what you’ve explained it sounds like you’ve cross securitised your properties, while the loans may be separate you were able to borrow over 100% on the second IP because you used your first IP as security. From the opinions I got from others on here, it sounds like you may run into issues in selling one of the properties. From what I’ve read in books and magazines the biggest issue comes when one property drops in value, however I’m not qualified so hopefully one of the other people on this forum can provide a better understanding.
Rudra
yeah true, but property investing is long term and i dont intend on selling any of them soon
I agree with that but I think there could always come a time where you need to sell a property to reinvest in another property or another couple of properties.
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