Cross Securitisation Risk overated??

[Foxy79]

I have a contract on an NRAS IP for 420K. My PPOR is worth 500K and I owe 135K on it still. I have heard about how important it is to structure the loans for tax purposes, flexibility in repurchasing etc etc. Can someone give me a rough outline on what would be the best structure as i have read there are many reasons why you should not Cross Securitise Bare in mind it is NRAS and CF+

 

[tobe]

I have a contract on an NRAS IP for 420K. My PPOR is worth 500K and I owe 135K on it still. I have heard about how important it is to structure the loans for tax purposes, flexibility in repurchasing etc etc. Can someone give me a rough outline on what would be the best structure as i have read there are many reasons why you should not Cross Securitise Bare in mind it is NRAS and CF+

Being NRAS and CF+ has no bearing on avoiding xcoll.

Draw enough equity from your current home as the deposit on the NRAS. I suggest borrowing the maximum allowable on the NRAS, and the minimum from your current home. that way you can take the remaining equity in your current home to your next purchase, rather than have it complicated by being tied to an NRAS property loan.

 

[Rolf Latham]

with

I have a contract on an NRAS IP for 420K. My PPOR is worth 500K and I owe 135K on it still. I have heard about how important it is to structure the loans for tax purposes, flexibility in repurchasing etc etc. Can someone give me a rough outline on what would be the best structure as i have read there are many reasons why you should not Cross Securitise Bare in mind it is NRAS and CF+

In general, I would recommend an approximate $100,000 secured loanonly to your PPOR, separate to the 135 that you currently have.

You could then do a 80% loan secured only to the NRAS property being 336,000.

The primary reason why you would want it to be set up separately is so that you get a fair and decent bank valuation on the NRAS property.................

Often people marketing this type of stock now that it won't value up in its own right, and therefore often look to cross collateralise with your home, so what ends up happening is the home into supporting the low valued in NRAS property and you are none the wiser until you refinance or try to sell it.

In addition, Many brokers and bankers like to just do one set of paperwork........

this old post below list some other reasons as to why crossing is generally not a good idea. Even though this post is quite old much of it still applies, and more can be added

http://somersoft.com/forums/showpost.php?p=120656&postcount=6

ta
rolf

 

[Peter_Tersteeg]

If this is the only investment property you expect to buy then there's little risk in cross collateralising. If you intend to build a portfolio, then it should be avoided for numerous reasons.

The biggest problem I see on a semi regular basis with cross collaterasliation, is a delayed settlement of a new purchase, because either the purchaser or the vendor has cross collatealised their portfolio (even if the new purchase won't be crossed). The ripple effect through a crossed portfolio can be staggering.

The biggest advantage of crossing I see is simply that it's one set of paperwork instead of two. Properly structured, avoiding crossing should have no disadvantage in interest rates, loan amounts or tax deductions available to the borrower.

 

[Spectre]

Broker should be able to do a quick servicing assessment, determine where the deal fits and before jumping through bank assessment get the valuations done on both properties upfront.

Equity is a great way to hide valuation shortfalls with cross coll. Not saying this project and NRAS either. The old speel of the valuations came in enough to satisfy the lenders policy is where you need to ask can be a warning sign espec with x-coll.

 

[jonmardell]

a common misconception is you have to split lenders to not cross x the properties. You could do it with the same lender. Basically you could raise the 20% plus the costs against you PPR in a new loan and in a separate application do an 80% loan against the new property.

Jon

I have a contract on an NRAS IP for 420K. My PPOR is worth 500K and I owe 135K on it still. I have heard about how important it is to structure the loans for tax purposes, flexibility in repurchasing etc etc. Can someone give me a rough outline on what would be the best structure as i have read there are many reasons why you should not Cross Securitise Bare in mind it is NRAS and CF+

 

[Aaron_C]

Avoid cross. Just do it.

 

[Mick C]

http://somersoft.com/forums/showthread.php?t=87835

^ Posted only a few weeks ago, classic example of why crossing has no long term benefits!

Take control.

 

[Foxy79]

Thank you guys, some great info there, I will do exactly what you suggested. Love this forum!

 

[Qlds007]

Foxy if it is a NRAS property in Brisbane i would be getting your Broker to pay very close attention to the actual valuation on the NRAS purchase.

Seeing a few of them come in short compared to the purchase price.

 

[Sunnytimes]

a common misconception is you have to split lenders to not cross x the properties. You could do it with the same lender. Basically you could raise the 20% plus the costs against you PPR in a new loan and in a separate application do an 80% loan against the new property.

Jon

Hi all, first message on Somersoft!
Just a simple question first,
the 20% plus costs raised from the PPR,
is it tax deductable?

I am in a very similar situation myself, about to get my first IP, with my PPOR owned outright.
I am thinking of doing the same, raising the 20% from my PPOR (to avoid Xcoll), and 80% on a separate loan on the IP.

Many thanks for any feedback.
Sunnytimes!

 

[Aaron_C]

20%+costs will be tax deductible if used for investment purposes, yes.

 

[jonmardell]

yes it would. The purpose of the funds determine whether it is tax deductible and not the actual security property. In your case you are borrowing against your ppr for investment purposes which is ok.
thanks
jon

Hi all, first message on Somersoft!
Just a simple question first,
the 20% plus costs raised from the PPR,
is it tax deductable?

I am in a very similar situation myself, about to get my first IP, with my PPOR owned outright.
I am thinking of doing the same, raising the 20% from my PPOR (to avoid Xcoll), and 80% on a separate loan on the IP.

Many thanks for any feedback.
Sunnytimes!

 

[fossill]

Hello everyone
Reading about the cross-securitisation
If I have a IP and ppor with this structure (Non fixed ).Is it possible to change it and what would be involved.

Thanks

 

[Rolf Latham]

Hello everyone
Reading about the cross-securitisation
If I have a IP and ppor with this structure (Non fixed ).Is it possible to change it and what would be involved.

Thanks

Usually its not hard

ask your current lender/broker to set them up as sole securities.

You will possibly get "why bother" noises....... these are a good indication to find a new banker or broker that will do what the client asks.

Obviously, may not be simple depending on what Loan to value ratios, incomes etc, but usually not rocket science

ta
rolf

 

[Aaron_C]

Hello everyone
Reading about the cross-securitisation
If I have a IP and ppor with this structure (Non fixed ).Is it possible to change it and what would be involved.

Thanks

Ask bank to change it but usually best practice is to refinance the x-coll away - why stick with the lender/broker who set you up in such a bad way in the first place?

 

[fossill]

Thanks
At the time of setting up I was not aware of it x-co,but after reading around I am now.And should have paid more attention to it.

In another question maybe( maybe stupid question) of learning the ropes,would it be advisable to pay 10k to a mentor or should I get off my bum and start learning what is going on.

I have already learn t a lot from posters here,and thank them for spending the time with their input.

Over the last couple of weeks I have been highly motivated.
Just yesterday My wife and I had a meet with a mentor after rattling over some figures with them the out come would be 10k in cost for their service.

Once we got home I said to my wife 10k is a bloody lot and we should reading everything we can get our hands and learning instead of being stagment for the past 5 yrs which we have.
In just same this to each other was a motivational boast.
So I think all in all is this achievable since we are NOT well educated in this.(IP)

Thanks

 

[buster]

Why not just pay a few hundred dollars for an accountant/consultant who is properly qualified to advise. If you do pay for a mentor be careful they don't set you up with an incompetent broker and flog of properties for their benefit and not yours.

 

[Rolf Latham]

Once we got home I said to my wife 10k is a bloody lot and we should reading everything we can get our hands and learning instead of being stagment for the past 5 yrs which we have.
In just same this to each other was a motivational boast.
So I think all in all is this achievable since we are NOT well educated in this.(IP)

Thanks

10k properly spent ona good buyers agent can be money very well spent

10k properly spent with a goodlife coach is alos money well spent IF you make us of the service.

I guess the question would be what sort of mentor does your 10 k buy you?

ta
rolf

 

[Shahin_Afarin]

Thanks
At the time of setting up I was not aware of it x-co,but after reading around I am now.And should have paid more attention to it.

In another question maybe( maybe stupid question) of learning the ropes,would it be advisable to pay 10k to a mentor or should I get off my bum and start learning what is going on.

I have already learn t a lot from posters here,and thank them for spending the time with their input.

Over the last couple of weeks I have been highly motivated.
Just yesterday My wife and I had a meet with a mentor after rattling over some figures with them the out come would be 10k in cost for their service.

Once we got home I said to my wife 10k is a bloody lot and we should reading everything we can get our hands and learning instead of being stagment for the past 5 yrs which we have.
In just same this to each other was a motivational boast.
So I think all in all is this achievable since we are NOT well educated in this.(IP)

Thanks

I would take my wife to Japan for a week at a nice hotel and spend half the time reading old somersoft posts. At the end of it you will be in a much better position than you were going it to the mentor.