X-collat...?ever OK

[john doe]

Hi all,
Not sure if this is meant to go under finance or legal issues, but here it goes...

Qu in short...Just wondering if, from an asset protection POV, it can ever be OK to cross-collateralise 2 properties.

In depth...
The particular situation I am considering is one IP owned by a hybrid trust and a PPOR under the name of myself. If these were cross-collateralised, would this be OK since one of them is owned by the hybrid trust and therefore still protected in a worst case scenario???

The reason I am considering this is that I want to sell my current PPOR to the hybrid trust to convert it into an IP. I then want to take the proceeds of this sale to purchase my next PPOR. A broker suggested to me this could be done, and the trust could borrow 100% the value of the property without lender's mortgage insurance, if both properties were x-collateralised.

Thanks in advance for any replies

John

 

[Rolf Latham]

Hi John

If you can do the deal without LMI with Xcoll then you can do it without LMI and have self secured properties. Its usually just a metter of structure UNLEss there is something weird in the asset mix

Ta

rolf

 

[john doe]

Hiya Rolf,

Hmmmm.... Doesn't that mean then that the lender will be lending you 100% the value of one of the properties without charging LMI?

Cheers

John

 

[Rolf Latham]

HI JD

The property sold in the trust can carry an 80 % Loan without LMI.

Use the proceeds of that loan to provide a deposit + costs for the next one, in or out of the trust.

ta

rolf

 

[john doe]

Gotcha. Thanks Rolf.

Cheers

John