Did I cross my loans ???

[devo76]

Sitting here having a beer and started to think about my first IP purchased in 07.
Basically I was new to this and borrowed 105%
the banker suggested I split the $300,000 into two loans.
$250,000 secured against the IP
$50,000 secured against my PPOR
This was done to save on LMI

Later I discovered the sins if crossing but the deed was done and loans fixed so I put it out of my mind and moved towards IP 2

Now the fixed period is about to finish so I'm looking at the finance again but something dawned in me.

Am I actually crossed ?????

With the $250,000 tied to the Ip and $50,000 to my PPOR. I don't think I am.
The $50,000 is just an equity loan secured to my ppor just as I have another loan secured to my PPOR for Ip 2 and 3.

Nothing really changes but makes me feel better about my early decisions.

Do people agree with this am I NOT crossed.

Cheers

 

[Aaron_C]

Best way to find out is to call your bank and ask. Splitting loans like what you've done doesn't mean it isn't x-colled.

 

[devo76]

Best way to find out is to call your bank and ask. Splitting loans like what you've done doesn't mean it isn't x-colled.

True and I will be ringing the bank. It just jumped into my head now so I thought I would ask the question.
I think I'm ok because the larger loan has the ip only as security and the smaller loan has my PPOR only as security.

 

[Rolf Latham]

250 / 300 = 83 %

So unless you got into wbc with their 85 % no lmi a while back or one of the other with that, there is a fair chance you are crossed.

Can be become quite an issue if not nipped early.

This week I have 2 clients that look like they are effectively stuck for no real fault of their own, and to sort the mess in one case may take a year or 2 wait, and in the other case maybe even selling down some of the portfolio and rebuilding ...........


Dont let this virus go unchecked.

In isolation crossing not a major problem, its where ongoing xcoll becomes an easy system to the borrower ( due to a slack broker, or a bankie with no better idea) with mainly or all one lender, and then exponentially compounded with fixed rates and/or falling values, increasing rates or tightening credit policy.

ta

rolf

 

[Rolf Latham]

Sitting here having a beer and started to think about my first IP purchased in 07.
Basically I was new to this and borrowed 105%
the banker suggested I split the $300,000 into two loans.
$250,000 secured against the IP
$50,000 secured against my PPOR
This was done to save on LMI

Did u actually pay some Lmi ?

ta
rolf

 

[devo76]

Did u actually pay some Lmi ?

ta
rolf

Well picked. I forgot that I actually did pay some LMI. Just not as much as I would have with the single 105% loan.

It's only this one property in doubt.
Subsiquent ip deposit and purchase costs were funded via an equity loan secured against my PPOR with remainder from new loans secured against each ip so all good there.

 

[Rolf Latham]

if u paid some lmi, then its more poss u arent crossed,

Another way is to drag out the loan docs which shoudl clear whats used for security for what

ta
rolf

 

[BMan]

i done a similar thing although my loans werent split
i also paid LMI
mine are crossed
just read your loan papers they ill have what securities are on each loan

one thing i dont understand is if
property 1 is security to loan 2 is property 2 now secured to loan 1 aswell?

 

[devo76]

Thanks guys. I'll drag out the docs or make a quick call tomorrow.

I also remember when it come to drawing out more equity from my PPOR for my next ip. The amount was worked by

PPOR value - 20% - existin PPOR loan - $50,000 ip loan.
This supports my thoughts that I'm not crossed also.

 

[Perp]

It sounds like you're in "situation 2" on my blog entry Accessing equity and cross-collateralisation.

 

[devo76]

Yes 2 sounds about right perp.

What it looks like I have done( blindly to start with) was draw approx 15% of my PPOR value($50,000) to buy ip 1 and then I started a second loan for another 65% to cover ip 2 and 3 etc.

I probably should have sourced a loan for the full available amount first and use as required. This would have allowed me to spend less than $50,000 on ip 1 leaving more available funds for the next purchases.

But still things don't look as bad as I initially thought .

 

[Aaron_C]

The banks will cross collateralise your properties unless you give them specific instructions not to...