The danger of x-coll

wobbycarly

wobbycarly

There is often a lot of discussion on here about the dangers and benefits of x-coll.

I'd like to share our perspective.

We currently have 5 properties with ANZ - 1 PPOR and 4 IP. We are expecting to sell one, so I rang ANZ to find out the x-coll status, as I knew there was some crossing going on.

Without going into the values/loans of each, here's what I found.

Property - security
PPOR - PPOR/IP1
IP1 - PPOR, IP1, IP2, IP3, IP4
IP2 - PPOR, IP1, IP2, IP3, IP4
IP3 - PPOR, IP1, IP2, IP3, IP4
IP4 - IP4, IP1, IP2

We are looking to sell IP2. Can you imagine the shenanigans that will need to go on at settlement? And how much money we end up with?!? Then within the next 12-24 months, also looking at selling and upgrading the PPOR,

Long story short, I have made an appt with the bank on Tuesday afternoon, to look at getting (where possible) each loan standalone with a single property as security. What I expect after that is the following:

Property - security
PPOR - PPOR
IP1 - IP1
IP2 - IP2
IP3 - IP3/IP1*
IP4 - IP4

Wish me luck - I'll update this after my mtg with the bank on Tuesday!

* I don't have the time or patience to go through a full application process to split these loans out, so happy to leave them crossed at the moment.
 
wobbycarly said:
.....I have made an appt with the bank on Tuesday afternoon, to look at getting (where possible) each loan standalone with a single property as security.
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My concern for you Rob is that you have high expectations. There is nothing in it for the bank. They'd prefer the status quo. :(

Let's see how you go unravelling that mess.;)
 
Propertunity said:
My concern for you Rob is that you have high expectations. There is nothing in it for the bank. They'd prefer the status quo. :(

Let's see how you go unravelling that mess.;)
Click to expand...

Over the phone, they have said it's possible. I will go in enthusiastic and positive... and see what happens. :p
 
Thanks for sharing your experience wobby. May prove valued to some members (possibly some that deny their is no problem with X-coll)
depends on the LVRs, might be some LMI involved.
 
It might be easier re-write all the loans as if you were applying with them the first time from another lender, only problem is the credit file hits that way.
 
BV said:
Perhaps he's getting a huge discount from ANZ
Although from my experience with them I doubt it
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0.85% Once we get this sorted out, we will certainly look to reduce our exposure with ANZ. ie, our next lending will likely be with someone else.
 
BV said:
Perhaps he's getting a huge discount from ANZ
Although from my experience with them I doubt it
Click to expand...

they r offering 1% off to anyone with borrowing totaling over $750k , however i believe that is short sighted approach to ur portfolio structuring going for rate.

spread it around and long term u will be please u did
 
I uncrossed my two loans late last year, which is what triggered the ultra-low valuation I got that cost me $8000.

Every time I complained, the first answer I got was just to keep the loans crossed, there'd be less paperwork and it wouldn't cost me a cent. They really, really don't like uncrossing loans. On the upside, after being stuffed around by them for so long (they wouldn't give us a new loan either), even though we are out of pocket $8000 (or rather just have $8000 less deductable debt at tax time, purely because of a bank decision I wasn't allowed to appeal) at least it will be easy to move one loan to a different bank.

Their loss. We are getting our building loan elsewhere.
 
sashatheman said:
What would you suggest is a good way to avoid this, Wobbycarly?
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Firstly, don't purchase a property that requires a low LVR! :D My first IP was a 4x1BR block of units - bank would only allow 70% LVR. When we went to get our second IP, we needed to cross it all up to avoid LMI. Second tip - pay LMI if it means you can get separate loans. I should emphasise that at this stage of our investing journey, we had no idea what we were doing!

By the time we got to the 3rd IP - refer above! Again, we "needed" to put everything in... according to the bank. I actually wonder if our broker at the time didn't work hard enough for us, or if we were hampered by our situation right then.

What I would have done differently? Well, I would attempt to avoid x-coll at all. Once you start down that slippery slope, it is very difficult to back up.
 
I recently separated loans with Westpac and I was surprised at how easy the process was. So much easier and more freedom now if want to sell. Good luck!
 
wobbycarly said:
Firstly, don't purchase a property that requires a low LVR! :D My first IP was a 4x1BR block of units - bank would only allow 70% LVR. When we went to get our second IP, we needed to cross it all up to avoid LMI. Second tip - pay LMI if it means you can get separate loans. I should emphasise that at this stage of our investing journey, we had no idea what we were doing!

By the time we got to the 3rd IP - refer above! Again, we "needed" to put everything in... according to the bank. I actually wonder if our broker at the time didn't work hard enough for us, or if we were hampered by our situation right then.

What I would have done differently? Well, I would attempt to avoid x-coll at all. Once you start down that slippery slope, it is very difficult to back up.
Click to expand...

wobbly u could have avoided x-coll on the 2nd and 3rd purchases by getting second loans against the current properties and using those funds as deposit to purchase next properties. it was a lazy and bad option by ur broker/banker to do it the way they did

there was no need to pay LMI u just needed to do each new purchase as 2 loans (1 against old place and one against new place)

cheers bt
 
Bigtone said:
wobbly u could have avoided x-coll on the 2nd and 3rd purchases by getting second loans against the current properties and using those funds as deposit to purchase next properties. it was a lazy and bad option by ur broker/banker to do it the way they did

there was no need to pay LMI u just needed to do each new purchase as 2 loans (1 against old place and one against new place)

cheers bt
Click to expand...

Did I mention back then that we had no idea what we were doing? :D

Agree, I think the broker may also have been a bit lazy. I believe there were additional complications as IP1 was in my name, IP2 was in wife's name and IP3 was in joint names. And there's been re-fi along the way.

The reasons for x-coll were probably a little different from originally described, but close enough for the discussion at hand. And this was long enough ago that the memory is a little hazy on all the details... :eek:

I certainly know a lot more now than I did then, and when using a broker, will be more forthright with OUR requirements, not what's easier for them and/or the bank.
 
wobbycarly said:
I certainly know a lot more now than I did then, and when using a broker, will be more forthright with OUR requirements, not what's easier for them and/or the bank.
Click to expand...


Good luck trying to impose your requirements when they diametrically oppose the requirements of the, now much more conservative Bank requirements.


When going cap in hand to a massive institution grovelling for their money, who couldn't give two knobs of goat **** about you and your lot, how exactly do you intend to impose anything at all......and if competition is your answer, what makes you think they differ at all ??
 
Can banks just cross collaterise without you knowing it? whats the best way to check?

I have repeatedly asked;)told our broker I dont want to xcollaterise our IPs as we are using the same bank twice.
Is their recourse if your broker has done this and there is a long paper trail specifically asking for it not to happen??

Forget the above..just had definative confirmation no crossing..
 
Last edited:
Pay LMI....and check the loan documentation to see that only the property you are buying is listed on the loan documentation.

If you take LMI....they will be hard pressed to cross-collateralised. They will of course suggest to you ..why you would want to pay LMI. Politely...tell them to get nodded.

So far ...all banks have done my bidding..all my are single loan properties.

sammmeee said:
Can banks just cross collaterise without you knowing it? whats the best way to check?

I have repeatedly asked;)told our broker I dont want to xcollaterise our IPs as we are using the same bank twice.
Is their recourse if your broker has done this and there is a long paper trail specifically asking for it not to happen??
Click to expand...
 
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