equity loans



From: Anonymous

Hi all,

I'm a newbie and just starting to think of buying my first IP by using the equity build up in my home. I know that to avoid cross-collateralisation, I could take out a line of credit using the equity in my home to back it. This could then pay for the deposit on an IP, and I take out a separate loan for the rest of the cost of the IP.

But you know those equity home loans offered by banks, like the Portfolio Loan from St George? They set up separate accounts for investment purposes and your home, but it's all backed by the equity in your home. Would that be cross-collateralisation if I used such a loan to pay for the deposit on an IP?

I hope this makes sense.

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Reply: 1
From: Rolf Latham

Hi Jim

No they would generally not be xcolled, especially if you put the IP with another lender.

Portfolio is a good product. Similar products are available for example through Westpac Premier Advantage Package at up to 0.7 % less.


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Reply: 1.1
From: .watto .

Gday Jim,

Its preferred that people don't post as anon's as it gets confusing following threads with lots of anon's.

Also lots of the experienced guru's wont respond to anon posts.

If you don't feel comfortable coming out then make up a name to post under....

Just as an side question.

Will banks lend more $$$ when xcolled versus using 20% deposits from an LOC or is there no difference to serviceability issues?

Melb Freestyler
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Reply: 1.1.1
From: Rolf Latham

Hi Watto

Normally, xcoll does NOT improve your service position. Indeed it can even hurt you badly of there is marginal equity in the deals.

For example an owner occupied refinance at 360 k for 90 % of 400 value and a separate IP purchase at 95 % with LMI at 190 k loan for a buy price of 200.

If you cross collateralised those two deals they would unlikely float because the overall LMI exposure with the one provider would be > 500 k and they get nervous at more than 85 % at that level unless you make a squillion dollars. The two deals together would be 92 %. You would have better success to place each deal with a different lender that uses a different mortgage insurer. Alternatively you could try some of the smaller (and bigger) non bank lenders that seem to be getting around the LMI issue.

I know of one deal in the last week that NO mortgage insurer would touch 695 at 90 % that TWO non bankies gave "provisional" OK over - remains to be seen as to whether they get across the line - I would not be suprised though since rules are meant to be broken.


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