Using IP as Security to purchase PPOR

How does this work? Our MB has explained that we will stay with the current lenders for my two IP'S but the new lender for the PPOR will ask for the investment properties as security for the new purchase. Once we have equity of at least 20% in PPOR, the bank can then remove the security relationship and then the PPOR is stand alone.

This is different to x-coll with one lender...does it just mean if we default on the PPOR that the IP is at risk too?

In what situation would this be something a bank would ask for?
If everything is in your name, if you default on any of the loans everything else is at risk anyway, regardless of whether it's cross-col'ed.
Because it's easier for them to take the IPs if you default. Also, if say prices fall and you sell one, they might be able to just take the proceeds and use it to top up the loan.

Just gives them more control.
Sounds like hes running a 2nd mortgage and cross coll'ing

Consider funding the deposit out of the 2 ips and then use that as stand alone with the new purchase.

Easier for the broker paperwork wise - no (actually sounds like they're being lazy to some extent)
Better for you - yes
More flex for you long term - yes

Unless there is a VERY good reason too your benefit, id think hard about that.

there are some instances where this would a good strategy, but they are rare

My strategy is to buy and hold long term..we would be looking to release the security relationship as soon as we have 20% equity in the PPOR...which essentially would be once we purchase it as we will have a 20% really, it seems like a means to get the mortgage and then after a few months, release the security relationship.
if all the debt is with/going to be with ANZ then there is no reason to cross and I've never had them ask to do so. You MB needs to be presenting the deal right IMO.
My strategy is to buy and hold long term..we would be looking to release the security relationship as soon as we have 20% equity in the PPOR...\.

This is assuming they will allow u to. For some reason they may not .

You obviously have a concern of some sort with all this, otherwise you would not be asking the question.

You can structure this "clean" and tax effectively from the start.

My main concern is I am confused as to why security is required when we will have a 20% deposit.

I have asked my MB this question and am awaiting a response.

20% cash or equity deposit? If it is cash, the security will be the new house you are buying. If it is equity, your security is whatever the equity is coming from.

I'm trying to raise a 40% equity deposit (no cash) at the moment but am thwarted as the title of our new block of land that we owe a big fat $0 on seems to have vanished - no idea where it has got to. I was going to take the title to another bank and do a stand alone loan with it. It doesn't quite make 40% on construction costs, so I might need to pull a few $1000 from one of the IPs. But if I can find a bank who will lend on *completed* value we have something like 75% equity deposit, otherwise we only have a 35ish% one.