cross collateralisation

Hi all
can I have your advice please. I have property with approx $40,000 in useable equity. I approached my bank to look at finance for an IP and I asked if we can release the equity for a loan that would not be secured against the first property. They said they could not do it and said the only way to use my equity was to secure my new IP against my current home. Am I correct in saying that this is an example of cross collateralisation?
If this is the case how can I use the equity in the first home to buy more property without having them all secured against that first house? Can it be possible to have a stand alone loan using my available equity?

Thanks guys
 
Rubbish.

You can access the equity without crossing the properties and its super easy.

Have the following set up:

Existing A/C: $xxx
Equity Release A/C: $yyy

These loans are secured against the existing property.

Then you have a separate loan against the new property you are purchasing. The banker would need to submit 2 loan applications. One for the equity release and the second for the new purchase.

You will be able to tell from the mortgage docs whether the properties are crossed or not.

Not that it makes a difference but which lender is this?
 
Ok firstly, it's from ANZ

You said I would need 2 new loans, an equity release loan and if course the new IP loan

Is the equity realease loan by way of refinancing the initial loan?
 
Nah you don't have to touch the existing loan and don't do a top up because you are only going to contaminate the tax deductibility of the loan.

Leave the existing loan as is and create a separate loan account with its own unique account number. Both loans will be secured against the existing property.
 
But by having both loans secured against the first house doesnt that mean the 2nd house I buy will also be secured against the first house??
 
But by having both loans secured against the first house doesnt that mean the 2nd house I buy will also be secured against the first house??

No. You will have 2 loans secured against property A and one loan against property B.

Instead of 3 loans secured against both properties A and B.
 
Ok..... Sorry mate I'm totally new to this so please excuse my ignorance

So, I go to the bank and request a equity release loan (IO or PI?) for $40,000 which is secured to the first home. From that I use as a deposit for my new IP loan plus associated costs?
 
You got it dude.

Always do IO unless you are not disciplined with your money. Ensure that the proceeds of the funds sits in the new equity release loan account.
 
Nice one cheers mate

Is the equity release loan known by any other name??

Does LVR and LMI have anything to do with it? He said they would do it they way you've explained and carried on about LVR % and LMI. He lost me at that point.
 
Nice one cheers mate

Is the equity release loan known by any other name??

Does LVR and LMI have anything to do with it? He said they would do it they way you've explained and carried on about LVR % and LMI. He lost me at that point.

ANZ will do it. If you are borrowing over 80% LVR then LMI will apply. You can use the equity manager product with ANZ.
 
I would rather use one as well but my bank are using an old valuation price which is a lot higher than what I believe it really is. If a broker uses a different they will do a fresh valuation, and I won't have any useable equity
 
I would rather use one as well but my bank are using an old valuation price which is a lot higher than what I believe it really is. If a broker uses a different they will do a fresh valuation, and I won't have any useable equity

Using a broker doesn't mean you have to change banks.

The ANZ valuation system will likely first bring up the existing valuation they've got on file, the broker has the option to use that valuation if you're happy with it. Normally we'd order a few valuation because newer tends to be better than old in the current market; make sure this is part of your discussions with the broker.

Seriously get a broker. It's pretty clear the advice you've been given isn't in your favour. Sharin is fantastic and has given you lots of good info. You will likely get a far more favourable outcome than trying to do this directly through the bank.
 
Back
Top