Borrow 100% but no cross collateral

[Delilah]

I assumed that to borrow 100% plus costs for IP's always meant cross collateralisation. If this is not the case, how do banks secure themselves should there be default? Also how do you structure the loans so to borrow full cost but no CC?

 

[Peter_Tersteeg]

You release your equity in another property as cash via a topup if the existing property is an investment, or a separate loan for investment purposes (can be a regular investment loan which is cheaper, or a line of credit).

This gives you a cash deposit then you borrow a percentage of the new property value. You might only borrow 80% of the new property value, but you've effectively borrowed the full purchase price plus costs.

 

[Terryw]

Maybe an example will help

Property A valued at $500,000
Loan A $200,000
set up a LOC for $200,000 loan B

Now go out and buy property B, valued at $500,000
Get loan for 80% $400,000 Loan C
Remaining 20% and costs come from the LOC, Loan B.

each of the loans, A B C are only secured by one property.
Property A secures 2 loans. Property B secures just 1 loan.

 

[Rolf Latham]

each of the loans, A B C are only secured by one property.
Property A secures 2 loans. Property B secures just 1 loan.

depends on the lender. some will still try it on.

read the mortgage docs very carefully so each loan has only ONE security property, or use a broker that knows what they are doing in this regard. Many brokers dont know any better than bankers because thats who they have been trained by. The training normally involves a subject call " obtaining maximum contribution"



ta

rolf

 

[Aaron_C]

As PT_Bear and Terry said. But if you have no other property/asset to draw upon, a 100% finance loan is technically still possible. It would involve borrowing money via personal loans or credit cards, but this is expensive.

 

[Mick C]

Do the loan top up either via
- LOC
- Split loan
- Loan top up ( ok in some circumstances...if the property is an IP and will alwasy be an IP )

Really if you have enough equity + done correctly you can borrow 110%+, 100% finance + stamp duty.

Im currently in the process of buying another IP; using 110% finance with no cross.

Regards
Michael