Having security released

[aw1]

Hi

I applied to my bank (Bank SA/St George) to have the security released on a third property we used to provide security to our first two IP purchases. I provided valuations by a registered valuer to assist my cause in showing that the properties are far and away under 80% LVR.

So I received a letter today where they have agreed, subject to me putting $100K into the loans!

I'm not sure what has happened here - have I misunderstood - is the bank allowed to hang on to the security as long as they want and not release it until they're satisfied?

The only way I can see out of this now is refinancing to another institution.

Adam

 

[Sabitor_84]

I have no experience with this but can you send another letter saying you will refinance if they dont reconsider your request?

Sure we are in a crisis but banks still want business. Do you have a personal lender you can ring up?

We have a personal lender with the ANZ and we have pushed him for things and he has made things happen previously. The last example was making a 95% lend happen when the bank changed its policy to 90%.


Matt

 

[Propertunity]

So I received a letter today where they have agreed, subject to me putting $100K into the loans!

Yep

I'm not sure what has happened here - have I misunderstood - is the bank allowed to hang on to the security as long as they want and not release it until they're satisfied?

Yep, I think you'll find as the lender, they can pretty much do whatever and that mortgage document you signed says much the same thing. But no-body ever reads it until this sort of thing crops up.That's why we all (most of us anyway) say do not x-coll.

The only way I can see out of this now is refinancing to another institution.

Yep, unless there is a clever MB who can do something for you.

 

[aw1]

Problem is they are fixed rate loans so they know they have me by the balls. One is about 30 months through a 36 month term @ 7.1% ($510k) though so the break fees might not be as stunningly bad as they are on the other loan (17 months through a 36 month term @ 7.59% ($330k).

 

[aw1]

Fully understand about x-coll now (learnt it here).. will never do it again. This situation will negatively impact our plans for the third property.

Another question - if I do refinance the $510k loan up to say, $550k with another institution, can I take the $40k surplus and dump it into the other IP loan to reduce the LVR. I know I physically can... but what is the tax office's view on this. Is interest on the full $550k deductible (the extra 40k is still being used for investment purposes)? I understand that reducing the debt on the smaller loan will reduce the interest deductions on that one.

 

[Propertunity]

Is interest on the full $550k deductible (the extra 40k is still being used for investment purposes)?

Tax deductibility or not of interest resides with the purpose of the loan. So if the $40K is for IP - it is deductible I would think.

 

[Rolf Latham]

SG is quite bad in this regard, but can you find out to see what their valuations were.

You might find that they may have come in lower than yours ?

As already suggested ( a bit late) cross collateralisation in most cases puts you into weaker position

ta
rolf

 

[outbackjack]

Jeez I hope I dont have this problem soon.

I am with Homeside, have 4 homes x collaterlised(spelling)

I have sold one which should mean I come out with about 100k, however if they take the latest Val it may reduce to 70K. I am hoping they release it all to me. I have a business thats gone sour and instead of going insolvent, I want to pay all the debtors off then close it.
I am selling all my properties at the moment. So I hope they release funds as we go.

 

[GoAnna!]

I wanted to remove a property from St George and i had it x colled with another.

I asked them to value both properties without stating why.

The values were sufficient for me to remove one. They did so without fuss. My loans were fixed. As Rolf said ask what their valuations came in at. Ask for a copy of the valuations so that you can object if they are unreasonably low.

I am now looking to sell the property I released. I presume that had I sold it still x-coll that I would not have had access to any of the sales proceeds. I am so relieved that I have full control over the sale.

 

[josko]

Problem is they are fixed rate loans so they know they have me by the balls. One is about 30 months through a 36 month term @ 7.1% ($510k) though so the break fees might not be as stunningly bad as they are on the other loan (17 months through a 36 month term @ 7.59% ($330k).

hi GoAnna!

Bad luck aw1,

A hard lesson but we all learn from them! St George are reknown for their wonderful X-Coll packages. They make it sound all rosey......now you can yuor glasses off and read between the lines.

Regards JO

 

[RumpledElf]

We need to get one released to sell - on current valuations (ie, from 6 months ago before renovations) the one we want to sell is at 30% and the one we want to keep is at 97% with the first one as security, but we also want all the proceeds of the sale for the first one, cash, so we can go ahead with subdividing the second one. So I guess we have to get the second one valued ... it is easily worth twice what we owe on it, somewhat more than twice if you factor in the value of the land after it is split off.

The annoying thing is we were forced into cross colateralisation because our loans were too *small* to just draw on our PPoR for the 40% deposit and set the second one up with a new bank, although if we could we would have had a bigger loan on the PPoR than the IP and some serious taxation weirdness if we rented the place out.