Security for loans



From: Jim H

Hello All.

I have read this forum for many months
but never posted. I have found that the
information posted has been invaluable!

I have a question about using property
that was acquired in a partnership.

Many years I bought a property with my
brothers. The property has increased in
value and I wish to draw upon some of
the equity to buy more investment

My question is can I use this equity
without compromising my brother’s
positions. ie If something goes wrong
and I default that the property will not be
taken from my brothers.

Thank you all in advance!

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Reply: 1
From: Sim' Hampel

I think the simplest way would be to refinance your shared IP with a LOC for the increased equity component. This way you can draw cash out of the LOC for deposits and such, and purchase the new IP with a self-secured mortgage only.

Anyone else have any other suggestions ?

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Reply: 2
From: Rolf Latham

Hi Jim

What Sim suggests will minimise the risk, BUT will not exclude it.

In your case use a diff lender for the LOC and the IPs is a good idea.

If you default under ANY of your loans the lenders can still sue for damages, and could get at your bros place, however the separation of the lenders buys you time.


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Reply: 2.1
From: Jim H

Thank you Sim and Rolf!

Just one last question, do I take out a
LOC on the full value of the equity or just
my portion?

As always your advice has been clear and
VERY helpful!!!

Thanks again!!
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Reply: 2.1.1
From: Justin O'K

Jim H

Your supposed to
take a LOC loan out on the
full value of the existing property.
ie then you can use your share of
the Equity even in cash if you wish.

Then buy the new properties with your
share of the equity.

Carefull dealing with family on this
one as they sometimes have a hard time
understanding what your doing.

Also, if you take some of your
equity out of the existing property
you should have some sort of agreement
or deed stipulating what you current
share of the existing property is
when you take the cash/equity out.

Good luck
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