Advise Needed on How to Untie Properties That Are Cross-Securitised

[Leilah]

Hi All

I have two properties. The first one I bought for $365,000.

A couple of years later I bought the second one for $325,000. At the time of the second purchase the bank used the first property as security for the second property, i.e. they are cross-securitised.

I have since enhanced my property education and realised that this was a big no-no.

Both properties are with the same bank (i.e. the ANZ).

My question is this: is it possible to get them untied and have the bank structure it in the ideal way, i.e. as stand alone properties.

Some extra information on the above scenario: property one has equity of $240,000 with $125,000 remaining on the loan. Property two has equity of $47,000 with $278,000 outstanding on the loan.

Any ideas regarding the best course of action to adopt would be highly appreciated.

cheers

Leilah

 

[marg4000]

I would suggest that you talk to the bank as a first approach, they may have some ideas as to how you can go about achieving the result that you want.
Marg

 

[Leilah]

Thanks, will do Marge.

Does anyone else have any experience of having to deal with such a situation in their property path or have any other advice to add?

cheers

Leilah

 

[sailor]

I had a couple of properties x-collat before I did the serious reading too. St George wouldn't separate them, so my MB sorted it out with another bank and now they are separate. Fortunately it didn't cost too much as I'd had them for a number of years already.

 

[Qlds007]

Hi Leilah

It is something your mortgage broker should do for you fairly easily.

One of the pluses with Anz is that your broker can instruct the valuations so you will have an idea of the property values prior to submitting the deal.

A negative with Anz is that they will only got to 80% Lvr on their line of credit product so you will be limited to the equity you can access using a a LOC. Fear not there are a couple of alternatives.

 

[Leilah]

Thanks Sailor for your comments.

And thanks Richard, I will get a mortgage broker to sort it out (please refer to an email I sent to you today to your email address).

cheers

Leilah

 

[Rixter]

Leilah,

I've uncrossed a few properties I purchased earlier on in my journey.

I didnt use a broker.

When I was relatively sure each individual property had increased in value enough so the property loan had become 80% of the property's new value I then contacted the bank.

They sent me out a form to fill in to release the additional security I use at the time to secure the loan.

Once their valuer valued the property to suffice the release, the bank sent me a letter of variation for my records stating the additional security has been release, and that the loan was now secured by the property it was originally purchased with.

Hope this helps.

 

[nonrecourse]

Name of the bank please

Leilah,

I've uncrossed a few properties I purchased earlier on in my journey.

I didnt use a broker.

When I was relatively sure each individual property had increased in value enough so the property loan had become 80% of the property's new value I then contacted the bank.

They sent me out a form to fill in to release the additional security I use at the time to secure the loan.

Once their valuer valued the property to suffice the release, the bank sent me a letter of variation for my records stating the additional security has been release, and that the loan was now secured by the property it was originally purchased with.

Hope this helps.

Which Bank ?

 

[Rixter]

Which Bank ?

Nope, WBC!

 

[Leilah]

Hi Rixter

That's helpful advice. I am going to get my mortgage broker to help me uncross them. I just did a calculation and realised that mortgage number two is at a LVR of 80.5% if I include the capital appreciation growth that it has experienced since I purchased it (hopefully, the bank will agree with my valuation). Property number one has a current LVR of 35% (forgot to include the capital appreciation in my equity estimate) so am not doing too badly on the equity stakes.

Thanks for the advice.

Leilah

 

[monster24]

sorry for this stupid question, but why is this a big No-No ??
I thought that I can only build a portfolio if the equity in IP-1 will be used as a deposit for the next IP-2 and so on ??? Or is the problem that both IP's were financed throught the same bank ?? We would like to buy our 2nd IP soon, so it would be good to avoid any complication from the start...
Thanks
Thomas

 

[Nth Brisbanite]

Hi All

I have two properties. The first one I bought for $365,000.

A couple of years later I bought the second one for $325,000. At the time of the second purchase the bank used the first property as security for the second property, i.e. they are cross-securitised.

I have since enhanced my property education and realised that this was a big no-no.

Both properties are with the same bank (i.e. the ANZ).

My question is this: is it possible to get them untied and have the bank structure it in the ideal way, i.e. as stand alone properties.

Some extra information on the above scenario: property one has equity of $240,000 with $125,000 remaining on the loan. Property two has equity of $47,000 with $278,000 outstanding on the loan.

Any ideas regarding the best course of action to adopt would be highly appreciated.

cheers

Leilah

I've got a reasonable number of properties and all of them, until recently, were cross collatirised. I'm untying them because I would like to increase my borrowing capacity as each bank has got its maximum loan limits. With some banks it is $3,000,000 while with others it may be $4,500,000. If you do not want to invest in a big way AND your financial situation is stable, I can't see any problems with cross collatirising.

A few other points worth considering:

1. You need a broker who specialises in investment property. I've come across some shockers over the past year.
2. It is possible to have standalone properties with the same bank but I think you may need sufficient equity with each property.
3. You may not need to refinance your property. I've heard that some banks are willing to untie the loans for you.
4. The costs in refinancing properties seem prohibitive initially but in the long run you'll be better off, especially if you want to invest in a bigger way

 

[evand]

Rixter,

I have done exactly the same scenario with Westpac. Made sure the properties could stand on their own feet. (much less than 80% LVR)

Contacted the bank, filled out a form or two, paid for valuations. Done!

Received title deeds in the post 2 weeks later. Very easy.

NB: I'm talking about un cross coll. and what the bank called 'release of security' at the same time. I wanted to own a few properties outright so had to un cross at the same time. Hope that makes sense.

 

[Rixter]

I'm talking about un cross coll. and what the bank called 'release of security' at the same time. I wanted to own a few properties outright so had to un cross at the same time. Hope that makes sense.

Yep. clear as mud....only joking. Yes thats what the application was called , Release of Security.

A very simple process as you have described.