Cross Collaterized - Advice ( still learning )

[Arthur Klassos]

I have looked through some other threads that deal with this topic at times. I apologize upfront to those who have seen and dealt with this.

I have 4 properties ( 3 are investment and 1 PPOR )

Currently all financed with the same Bank. I have a Line of Credit on my PPOR which has two sub accounts one for personal use and the other for one of my investment properties and two separate loans for two of the other houses. I have two separate trusts which are effectively owners of the 3 investment properties. Basically the bank has cross collaterized all my loans and this includes my house as security. Sorry guys hope you follow as it confusing writing this.

Anyway, the way it is set up, I would feel more conformable if i refinanced perhaps with another bank and undo this cross collaterization..

My question is - has anyone else been in this position and how did you go changing it, was it worth it ?

By the way, I am seeing NAB tomorrow as a new lender to give it a go, to change the structure that does not involve cross collaterization.

 

[traceyim]

Cross-collateralised help

Hi Arthur,

Go and see the bank but also go and see a good mortgage broker and explain you don't want to cross-collateralise. When you see the bank tomorrow ask them for a report on the best structure. Then take your time, Find out the cost of moving. Then see a mortgage broker and get some more advice before you make a decision. Ask lots of questions about anything you don't understand and ask if there is more than one way to structure the loans.

You have to realise that it is the policy of ALL banks to cross-collateralise. They won't suggest you do it any differently unless you ask and in many cases they will still say it is against policy.

You haven't mentioned which bank you are currently with but it is possible to separate your loans without moving. Sometimes this is advisable and cheaper.

But whatever you do don't go and refinance everything to another lender and end up in the same position. I have seen this before and unfortunately it's is very common.

It's also a good idea to discuss your future requirements and make sure you have the capacity to go forward and achieve your property investment goals. Ask these type of questions too.

Kind Regards,
Tracey

Property Finance Online
www.propertyfinanceonline.com.au
[email protected]

 

[Rolf Latham]

NAB

What was it about frying pans and fires...............Seriously, theyd be the last to look at cleaning it up. Potentially spread amongst 2 or 3 dependog on your current needs and resources and future goals

Speak with soemone like Tracey who has answered your post to help sort out your pickle.

If it was just 2 props, then I wouldnt stress, but your current structure hasnt been built for your benefit

ta
rolf

 

[RumpledElf]

I'm trying to uncross and free a property at the moment. Considering I put in the right forms but the forms are so vague noone can tell what I want, so the bank rang up to ask what I wanted. I sincerely hope they actually *do* uncross us instead of just crossing two different properties. One of our properties is just crossed for no reason at all, it has no mortgage (never has) and isn't needed as security (never was) but they've STILL got it tacked onto another mortgaged property as security

They've now got 6 working days (including today and settlement) to value the houses and uncross the loans. I can see why they say '10-15 working days' to do anything. That's 1 day to actually do it, and 9-14 days of stuffing around not doing anything at all.

 

[Arthur Klassos]

Thanks for your input guys.

I know i am in for a lot of fun in trying to restructure.

I initially did not want to set up like this, but this happened because

I was building a property and because it had no income the bank decided to
cross collaterize. This house is about to be finished in the next 4 - 8 weeks and will then be income producing. Thanks Tracey, I should of thought of the exit fees also, I have asked my broker initially to do this set up, but i think he has been interested in getting the deal done than setting it up as I wish, thats why i have decided to see how i would go with bank direct. I have no previous experience with NAB and I am mindful of Rolf's comments , one of my friends has 17 properties in Adelaide and all through the NAB, basically he asks for the loan and they say how much. I am not nowhere his position, but i do like to have someone on my side such as a "GOOD" broker or a banker i can develop a good working partnership with.

Rumple's comments make me concerned regarding the difficult path i have ahead.

On my way to the Bank Now - wish me luck.

Thanks

 

[Dazz]

Good Luck...

 

[Rolf Latham]

one of my friends has 17 properties in Adelaide and all through the NAB, basically he asks for the loan and they say how much.

Ouch

This looks great,but has HUGE exposure associated with it...................

your mate wont know he has a problem until he has the problem

On the basis that he is looking to grow, or there are market changes, This type of structure ALWAYS ( almost) ends in tears, its just a matter of time !

Then it becomes a yucky mess that may not be able to be mopped up

ta
rolf

ta
rolf

 

[Rolf Latham]

but i do like to have someone on my side such as a "GOOD" broker or a banker i can develop a good working partnership with.

A banker is working for the lender, with little real interest in your longer term future. They cant set you up for your best long term interest, its contra to the job

A good broker works for you .........well for themselves usually ( often) but at least has a direct financial interest to make things work beyond lender x comfort factor, and to set things up like that from the start.

The banker will come to the end of the road, and go , sorry buddy,no can a help any more, we are beyond our comfort level

Im not saying direct banking relationships are bad, im saying be aware of what a banker can and cant do for you.

ta
rolf

 

[Dazz]

be aware of what a banker can and cant do for you.

Also be aware of what a mortgage broker can and can't do for you.
Also be aware of what the banker's assistant can and can't do for you.
Also be aware of what your solicitor can and can't do for you.
Also be aware of what their solicitor can and can't do for you.
Also be aware of what your accountant can and can't do for you.
Also VERY aware of what the little turd of man down in the basement filing your unregistered title deeds can and can't do for you.
Also be aware of what council's 3rd secretary can and can't do for you.


I stopped at only 7, but my list is hundreds and hundreds....


It does your head in trying to be an educated consumer of every service under the sun. My knowledge on widget # 37, Model 'K' which superceded the wifi series 4 section b wasn't quite up to scratch and I got shafted. Damn !!!


Sometimes you know you're going to get shafted when "consuming" a good or service. I think the trick is to educate yourself on the big ticket items and let the small things thru to the keeper.

 

[RumpledElf]

I should of thought of the exit fees also

That's another reason I'm in bank paperwork hell. The exit fees aren't high but neither are our loans, so trying to keep the loans but on different properties with different UNCROSSED security also saves us exit fees.

The valuation dept of the bank actually rang today (while I was trying to buy donuts. Rude!) and said they'll get the valuer to call us 'sometime next week'. I had to remind them, yet again, that the property that is securing both of our loans is getting sold next week so they'd better get a wriggle on.

 

[Rolf Latham]

and said they'll get the valuer to call us 'sometime next week'. I had to remind them, yet again, that the property that is securing both of our loans is getting sold next week so they'd better get a wriggle on.

Ho hum.............so standard its just not funny..........

ta
rolf

 

[RumpledElf]

I know ... doing something like this gives you an appreciation of the sheer number of departments in a large bank. I think it would be easier if we just wanted more money off them

Dazz's current saga is an even better example of banks vs solicitors vs the titles office though

 

[Pa1nter]

Can you get some more LOC and purchase something undermarket by paying cash, therefore you will have the deed to the property yourself and when you need to continue buying,get LOC with another bank and Bobs your uncle.
I don't think that your current bank will let you go,they already have you by the short and curlies.

 

[gooram]

FYI in a former life I was able to uncross 3 loans with the CBA, via email to my local branch manager.

I was explicit in what I wanted to do, he sent the forms that I needed to sign and after some reminders and corrections it was all taken care of.

What made it easy was the fact that all properties had sufficient equity, so there was no juggling required, just had to release securities from existing loans. (well lets be honest I don't know what happened behind the scenes but that was the end result).

I don't know if I would recommend it, but in this case, it worked out. I've heard many stories where it hasn't.

 

[SENIOR]

I suggest
Wait until you have 20% equity in each of your ips and then approach the bank and they should be able to fix it
Also have your line of credit against your PPOR
If you need to purchase more ips it becomes harder
What I did was keep buying properties and didnt worry about it then when I have finished purchasing ips wait until I had at least 20% equity and it got sorted out

Hope this helps

 

[Dazz]

then when I have finished purchasing ips

When do you reach that point SENIOR ??

 

[Arthur Klassos]

I had a fantastic meeting with the NAB today.

I am confident that they will set me up as I wish.

PPOR - LOC with sub accounts ( personal and 20% deposits for each house) +
Separate Loans ( Uncrossed on each individual property).

Thanks for your comments, they have been on immense practical use.
If they approve all this, I will have to think whether to get new purchases with the same bank or maybe spread them around. Hopefully with more reading and asking I will be able to devise a reasonable strategy for further growth. I dont like to keep my eggs in the same basket like my friend does. Now to find a good broker that may be able to help my interests.

Once Again Thanks Everyone.

 

[pully]

glad to hear you have clarity.

we are on a similar learning curve re loans etc.

we are not used to these modern terms, off set, redraw etc. not having borrowed for along time.

we want to buy a new PPOR and we have all our rentals and present home debt free. we need to gain funds to buy the new property and wanted to avoid dipping into super, selling shares or selling rentals under pressure.

after several interviews this week with banks/accountant/brokers we are a little wiser. the different advice and attitudes were quite fascinating.

we wanted to be clear about costs to get a loan, service it and exit fees, or whatever they are called. we were particularly interested in exit because it is unlikely we would want undeductible interest for long.

one broker said he could not help because if we did not keep the loan for long he would not get paid?? as said we are new to the process.

its looks like we will get a LOC which sounds like a giant credit card? this cross col business sounds as if it is common practice. most have said they want the new property and 1 other but 1 loan.

it is valuable to hear others experiences.

 

[Rolf Latham]

Hi Arthur

Thats great news !

See if they will also strike the " all monies" clause out of their mortgage docs which is a sneaky extra little bit of security for them

ta
rolf

 

[SENIOR]

When do you reach that point SENIOR ??

Hi Dazz
I bought my last place 6 years ago and retired 4 years ago
I started planning back in 1996 when I bought my first ip

Senior