Another crossing loans question

[RedCat]

I'm in the early stages of probably moving all my banking and mortgages from NAB to Bank of Melbourne. I know it's not wise to have all loans with one bank, but it just works better for me that way due to all my business banking being with the same bank also (yes that's all moving over as well).

Currently I have 4 separate mortages with NAB and owe $1.7M. Today Bank of Melbourne approved taking all the current loans plus a 5th one for up to $760K for a total now of approx $2.46M. LVR is 20%.

Bank manager said they would be looking to cross the loans. I told him no way and that it wasn't the case with NAB - he said he'd look into it and get back to me. Now obviously I have the upper hand, my mortgages are still with NAB right now and I could just get the new one with them, but does anyone know if it's a bank policy or how to argue my case?

To be honest, I don't even know or understand why they shouldn't be crossed, I just know it's a massive no-no from what I've read on these forums.

 

[Terryw]

At 20% LVR, that is outrageous!

Not necessary and a major headache for you. Imagine if you wanted to sell one property - they would have to value 4 of them to be able to allow you. (prob just a computer value at that rate, but still a major hassle).

 

[Jamie M]

Now obviously I have the upper hand, my mortgages are still with NAB right now and I could just get the new one with them, but does anyone know if it's a bank policy or how to argue my case?

You don't need to argue anything. Tell him/her how you want it structured. If they can't meet your requirements, they don't get your money.

Cheers

Jamie

 

[RedCat]

Anytime I've borrowed for a property since my first one 13 years ago I've had to have a 20% deposit regardless of where the market is at due, I think, to being self-employed. To date the loans haven't been crossed. Will take the advise above and thank you both for your input.

 

[Rolf Latham]

I'm in the early stages of probably moving all my banking and mortgages from NAB to Bank of Melbourne. I know it's not wise to have all loans with one bank, but it just works better for me that way due to all my business banking being with the same bank also (yes that's all moving over as well).

Ignore me if you will , but that would normally be regarded as silly unless you are a banker.

Do you want convenience and "risky as" or do you want "right and risk managed"


I have recently attempted and FAILED at trying to sort out 2 people's mess and tears that have had this flawed logic. Decades of hard work and millions of $ down the S bend. In those cases they may have been gone anyways ( an autopsy tells me otherwise) but mixing biz banking, personal banking, personal investment provides for a HUGE potential explosion, it just depends on the length of the fuse.

Adding xcoll just adds a couple of cases AN60, so dont worry too much about the xcoll


PLEASE do yourself a favour and think this through.

What are you actually wanting to achieve, whats the end game ?

ta
rolf

 

[MIW]

No Cross-C, no all monies clause and not too much equity!

I'm in the early stages of probably moving all my banking and mortgages from NAB to Bank of Melbourne. I know it's not wise to have all loans with one bank, but it just works better for me that way due to all my business banking being with the same bank also (yes that's all moving over as well).

Currently I have 4 separate mortages with NAB and owe $1.7M. Today Bank of Melbourne approved taking all the current loans plus a 5th one for up to $760K for a total now of approx $2.46M. LVR is 20%.

Bank manager said they would be looking to cross the loans. I told him no way and that it wasn't the case with NAB - he said he'd look into it and get back to me. Now obviously I have the upper hand, my mortgages are still with NAB right now and I could just get the new one with them, but does anyone know if it's a bank policy or how to argue my case?

To be honest, I don't even know or understand why they shouldn't be crossed, I just know it's a massive no-no from what I've read on these forums.

There are people that like to cross like Margaret Lomas but I personally do not too.
My reasons for not to cross:
1. If you wish to revalue or gain extra equity for any reason the bank would look to revalue all properties (all portfolio) and may charge you a fee for all the valuations.
2. Usually if one bank holds all the eggs in one busket they can undervalue your properties (no room for negotiation)
3. If you get into any trouble they will dictate the rules of which property to sell - not you (no room for negotiation)
I was told never to trust the banks (not the people that work for the banks - some of my dear friends are bankers).
Just another point, make sure that there is no 'all monies' clause too (if you can). It's very important.
I too just refinanced 3 loans (settlement tomorrow) and I specifically asked all the loans to be all stand alone, no cross, no all monies clause and my combined LVR was 65% not 20%.
I know the initial work is in all that paperwork but I think it's worth it.
A point of note! If you have 5 loans and they add up to 20% LVR I hope you are not giving the bank 5 separate titles? Banks would like to hold more equity than necessary. I would perhaps refinance all loans to 80% LVR, or what ever you feel comfortable with (since you are doing that anyway) and keep some titles.
I hope you know what I mean....You have 5 loans to the value of $2.46M but backed by equity to the value of $3.075M (representing 80%), which may be enough just to give them 2 or so titles and you keep the rest.
Food for thought...so mortgage brokers comments or financial planners are welcome.

 

[Aaron_C]

Yes freeing up titles to take to another lender is a good idea. It's never a good idea to put all your loans with the same lender unless there is a compelling reason to do so. Remember what they say about banks - They hold your umbrella when the sun is out, but when it starts raining they take it away.

 

[travelbug]

Currently I have 4 separate mortages with NAB and owe $1.7M. Today Bank of Melbourne approved taking all the current loans plus a 5th one for up to $760K for a total now of approx $2.46M. LVR is 20%..

So you only owe $492,000 total? That's 20% of the value of your property? If that was the case you would only need one loan on one property. The rest could be unencumbered.

You mentioned you had to pay 20% deposit so I thought maybe you were confused and meant you own 20%. In which case your LVR would be 80%.

Please clarify. Thanks.

 

[Peter_Tersteeg]

Just be aware that any properties held within the same St George/Bank Of Melbourne Advantage Package will be cross collateralised.

The only way around this is to put them into separate packages.

 

[Terryw]

One of my friends had 2 properties crossed. He had a heartattack and financially went bad so he decided to sell both. One sold first, but prices had dropped. He was desperate too so accepted a lower price, but still over the loan.

The bank did a valuation on the remaining property and it had dropped too. Therefore they wouldn't release the security on the one he sold unless he paid $40,000 off the loan of the other. He didn't have any money and the sale was only going to leave him with about $10k after paying the agent and the loan. He ended up losing the sale and then lost both houses.

If he had not crossed he could have sold one without them needing to worry about valuing the remaining one.

 

[Rolf Latham]

One of my friends had 2 properties crossed. He had a heartattack and financially went bad so he decided to sell both. One sold first, but prices had dropped. He was desperate too so accepted a lower price, but still over the loan.

The bank did a valuation on the remaining property and it had dropped too. Therefore they wouldn't release the security on the one he sold unless he paid $40,000 off the loan of the other. He didn't have any money and the sale was only going to leave him with about $10k after paying the agent and the loan. He ended up losing the sale and then lost both houses.

If he had not crossed he could have sold one without them needing to worry about valuing the remaining one.

A simplified form of some of the many many disasters than can occur.

We almost always think it wont happen to us.............when u do enough deals, it happens surprisingly often.

Thats why we are SO AGAINST it ! Not just for the fun of the argument

ta
rolf

 

[Spectre]

at 20% lvr you could retain ownership of a few and not offer them as security to begin with. Why would you mortgage something if you didnt have to from the outset.

 

[RedCat]

Oh dear. So sorry I got it the wrong way around. 80% LVR. I WISH it was the other way around! AND I've wasted some people's time on their considered replies. Many apologies for that

 

[Marty McDonald]

Just be aware that any properties held within the same St George/Bank Of Melbourne Advantage Package will be cross collateralised.

The only way around this is to put them into separate packages.

Isn't that only true of the portfolio product? The loc with the sub accounts one. You can take as stand alone SV with offset under the package i thought. Perhaps not?

 

[Terryw]

Oh dear. So sorry I got it the wrong way around. 80% LVR. I WISH it was the other way around! AND I've wasted some people's time on their considered replies. Many apologies for that

Same principals still apply. In fact it is even more important not to cross because a slightly low value could prevent u from selling one property without paying lmi

 

[RedCat]

I'm just going to have to be aware and very careful to read all the paperwork to ensure it doesn't slip through the cracks.

My bank manager didn't know if I transferred a property from my company's name to my husband's name (which he'd suggested) that I'd have to pay stamp duty again so I'd better pay close attention.

 

[Terryw]

I'm just going to have to be aware and very careful to read all the paperwork to ensure it doesn't slip through the cracks.

My bank manager didn't know if I transferred a property from my company's name to my husband's name (which he'd suggested) that I'd have to pay stamp duty again so I'd better pay close attention.

Not to mention CGT. Why is a bank manager giving legal and taxation 'suggestions'??

 

[Peter_Tersteeg]

Isn't that only true of the portfolio product? The loc with the sub accounts one. You can take as stand alone SV with offset under the package i thought. Perhaps not?

I initially thought that it was the portfolio product, but I was advised this by one of their credit managers after specifically mentioning that we didn't want the new property crossed with the existing ones. He ended up creating a second package and waiving the fees on it. I did cross reference it with other sources in St George.

I'd be happy to be wrong about this.

 

[RedCat]

Have just received their initial offer but I don't think it looks very good, in particular #4! I think BOM are treating this one as a business loan because I rent it out to one of my 3 businesses. Currently #1-#4 are all with NAB at 6.82% and all are treated as standard home loans.

There is no crossing at least. Regardless of wanting to move everything over to BOM I may have no choice but to leave #4 with NAB unless the bank can come to the party. Really wishing I'd used a broker now.

#1 VIC - Borrower is me
BOM Offer - Advantage Package - $620K Loan - 30 years - P&I 6.9%

#2 SYD - Borrower is my company
Advantage Package - $342K Loan - 30 years - IO 7%

#3 QLD - Borrower is my Family Trust
Advantage Package - $320K Loan - 30 years - IO 7%

#4 VIC - Borrower is my Family Trust
Business Loan Variable - $420K Loan - 15 years - IO 8.42%!!!

#5 VIC TBC - Borrower is me & my husband combined (not yet purchased)
Advantage Package - $760K Loan - 30 years - IO 6.85%

 

[Spectre]

If I were you I'd talk to one of the forum brokers to see via a face to face meeting.

If there isnt a contract signed or a new house then the clock isnt necessarily ticking and you'd probably be well served $ wise too.