cross collaterization question

hi there,

i've read many times that i should avoid cross collat of properties. my mortgage broker seems to suggest that i do have them x coll. Not sure if her reason is bc it is easrier for her to process the loan.

are there any negatives to having them not cross collat ?
opinions appreciated, thanks
 
Cant think of too many negatives for not having the loans standalone.

Might mean a little more work by your MB or the lender but that is not your issue.

I think the disadvantges of doing so out weight any negatives a dozen to 1 at least.
 
I would have thought that your MB would promote the idea of avoiding cross collaterisation.

Setting up your finances correctly from the start may lead to you being able to borrow and purchase more IPs down the track - possibly giving your MB more business.
 
that's why i am suprised that she wanted them x collat.
i do want to borrow 100% of the purchase price , as i am using the equity off my first prop as a deposit on the 2nd. the equity should be enough and if not i am willing ot put some deposit down. is that why you think she wants them linked ?
 
Q: Is there any negatives to x'ing if you never intend on selling any of your properties?

When your one and only lender pulls the plug in you and you have to diversify lenders in order to continue borrowing and grow your portfolio, then X-Coll can make the process a lot harder, time consuming and stressful.
I used X-Coll very effectively when I was starting out.
Now I've reached a phase in my investment cycle where stand alone loans with a variety of lenders works better for my purposes.
X-Coll isn't good or bad. It's just a tool and how you use it determines if it's a good thing or a bad thing.
Rule of thumb: If it doesn't offer a big advantage in a particular situation, then avoid it.
 
that's why i am suprised that she wanted them x collat.
i do want to borrow 100% of the purchase price , as i am using the equity off my first prop as a deposit on the 2nd. the equity should be enough and if not i am willing ot put some deposit down. is that why you think she wants them linked ?

Sounds like a good opportunity to take the equity out of the IP and use it as a cash deposit for the next deal, with another lender.
 
When your one and only lender pulls the plug in you and you have to diversify lenders in order to continue borrowing and grow your portfolio, then X-Coll can make the process a lot harder, time consuming and stressful.
I used X-Coll very effectively when I was starting out.
Now I've reached a phase in my investment cycle where stand alone loans with a variety of lenders works better for my purposes.
X-Coll isn't good or bad. It's just a tool and how you use it determines if it's a good thing or a bad thing.
Rule of thumb: If it doesn't offer a big advantage in a particular situation, then avoid it.

Cant you just un-X by the way of a re-valuation as soon as the value of the property reaches 80% of the combined borrowing amount including the x-coll amount?
 
Cant you just un-X by the way of a re-valuation as soon as the value of the property reaches 80% of the combined borrowing amount including the x-coll amount?

Sorry when the value of the property gives you a clear 20% equity in the property i.e. LVR 80% of the loan against the property including the portion X-coll.
 
Cant you just un-X by the way of a re-valuation as soon as the value of the property reaches 80% of the combined borrowing amount including the x-coll amount?

You can. But with a large portfolio and lots of X-Coll going on, that turns into a very challenging experience. Which is the biggest understatement since Noah said "looks like rain".
I've nearly finished re-financing my portfolio. Been at it for a year.
 
As Rob said.

We were x-coll'd at the start which made it easier to acquire properties as we were with the same lender and used our PPOR.

Once your lender starts knit-picking your ability to get another loan then it's time to look at other lenders and that's where the x-col bit can turn into a negative.

We're in the process of untaggling ours and all I can say is get yourself a good MB as trying to tell the banks exactly what you want done is extremely painful...
 
You can. But with a large portfolio and lots of X-Coll going on, that turns into a very challenging experience. Which is the biggest understatement since Noah said "looks like rain".
I've nearly finished re-financing my portfolio. Been at it for a year.
I'm looking to X against a property to assist in my next 2 purchasers & I'm on the ANZ Breakfree package which allows me 3 free valuations a year, I am slightly concerned about X-ing from reading posts on this forum advising against, but I figured if I do X and then either pay down or wait for the growth to get the clear 20% equity including the portion X-ed, then utilise the free Val's to then un-x later thus allowing me to then re borrow. Is this OK.
 
I'm looking to X against a property to assist in my next 2 purchasers & I'm on the ANZ Breakfree package which allows me 3 free valuations a year, I am slightly concerned about X-ing from reading posts on this forum advising against, but I figured if I do X and then either pay down or wait for the growth to get the clear 20% equity including the portion X-ed, then utilise the free Val's to then un-x later thus allowing me to then re borrow. Is this OK.

That could work.
X-Coll is a great way to grow a portfolio when you have a bank lending you money. The problems start and the fun stops when they turn the money tap off. Then you have to talk to another bank. This is impossible when all properties are crossed with the original lender.
Like I always say, it's not a problem until it's a problem. There are no warning signs before this occurs. Loan app after loan app gets approved. Then it stops. You don't get some sort of amber light on the last approved one.
I wouldn't get too hung up on the "free" valuations. They cost two tenths of bugger all anyway, in the scheme of things.
 
That could work.
X-Coll is a great way to grow a portfolio when you have a bank lending you money. The problems start and the fun stops when they turn the money tap off. Then you have to talk to another bank. This is impossible when all properties are crossed with the original lender.
Like I always say, it's not a problem until it's a problem. There are no warning signs before this occurs. Loan app after loan app gets approved. Then it stops. You don't get some sort of amber light on the last approved one.
I wouldn't get too hung up on the "free" valuations. They cost two tenths of bugger all anyway, in the scheme of things.
When does the lender usually turn the "money tap off", if you have nothing X-ed and your "one" lender decides you are to risky, will other banks lend against your equity in the other properties?
 
When does the lender usually turn the "money tap off", if you have nothing X-ed and your "one" lender decides you are to risky, will other banks lend against your equity in the other properties?

What you might find is that your current bank won't count your current rental income or only 50% of it as income for serviceability reasons, you might have one too many credit cards or too high a limit based on their assessment criteria, other unsecured loans etc. So the 'money-tap' is the ability (or lack thereof) to get either a loan, LOC or a LOC top-up with your current lender who holds all your properties.

When your un-crossed, it makes it much easier to take advantage of other lenders packages, and the other lenders may have different assessment criterias.

We're going through an un-X'ing at the moment and one thing you usually don't count on is that it gets much harder later down the track when you have more properties, which is the one thing X-ing allows you to do!
 
I'm looking at buying another property at approx $210k & only wish to put in approx 5% + fees as a contribution & figured if I X-Coll against my PPOR I wont need to pay LMI, I have several other mortgages (Less than 80% LVR) for IP's but no credit card & no Line of credit, is there another way I can do it to avoid LMI as I figure LMI is waste of money?
 
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i can't see one positive of x-coll, great for the lender in many ways but no good for you at all,

personally if a broker recommended it i would walk away, can cause absolute nightmares.

Bankwest and Homeside at very least do a whole serviceability test if you want to unwind it and sell one or refinance one IP, so if your circumstances have changed they can make u pay back more of the debt than reducing remaining LVR to 80%, ANZ don't do this yet thankfully.

X-Coll is in the top 3 mistakes an investor can make IMO, not only should u not x-coll, every property should be with a different lender to protect against changing policies and increase flexibility.

Forget fees and rates etc, the ability to keep going will outweigh those times 100.
 
Matthew, nothing wrong with LMI, helps build portfolio quicker!

In your situation just get a second loan with same lender against one of your properties to use as deposit on next purchase, take that deposit and then get a new loan secured only by new property and with a new lender at if you want 80%. repeat,repeat and then repeat again and again
 
so you;re saying that i can take the deposit from property one (usign the equity) and take it to another lender ? i always thought that if i was using the equity from property one then the 2nd property also had to be with the same lender
 
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