Cross collateralisation

Hi,

Can someone please explain to mean what cross-collateralisation is and how I know if my loans are cross collateralised??

Thanks,

Kate

Hi Kate

C/C is where you have more than 1 property and your loan is over both or multiple properies.

Assume you have a PPOR with no loan against and wish to buy an investment property for $400K.
You need to borrow $420,000 to cover your acqusition costs and wish to borrow the full loanamount.

The Bank may take both the new IP and PPOR as security and give you one loan across both properties.

If in doubt have a look at the Letter of Offer you were given by the lender and under the "Security section" it will state the properties being held as security. If both are mentioned then the loans are crossed.

It is easy for a lender / broker to structure the loans correctly if they want to however most lenders wont as it is in there interest to cross the loans over multiple securities.

Hope this explanation helps.

Cheers

Yours in Finance

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Want to live of your rental income? 0-40 properties in a decade. Email me for a copy of my API Magazine interview

Thanks for that Richard.

We bought a property which we lived in and renovated and now it is being rented, we used the equity in this property to buy our new home. So we have three different loans, the equity loan was secured buy the first home and the main loan for the new house was with a different bank and I'm am 99% sure (without looking at the paperwork) it was secured with the new home. Does this sound ok to you?

Thanks,

Kate

Hi Kate

Yes if the first 2 loans (investment loan and equity loan for the new PPOR) are secured against the current rental property and the balance of the PPOR loan is secured against the PPOR sounds like you have done it right.

Dont forget to get the existing lender to revalue your PPOR regularly and draw back up to the original loan so you can pay down the equity loan secured against the IP so you can reuse the equity again for your next IP.

Cheers

Yours in Finance

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Want to live of your rental income? 0-40 properties in a decade. Email me for a copy of my API Magazine interview

Thanks Richard, I feel a lot better now!

We have only bought our PPOR last year and are renovating, we are getting it re-valued in the coming weeks to get another equity loan to buy another IP. We are full steam ahead this year!

Thanks

Kate

Thats the spirit Kate.

Be suprised how many forum members have contacted us since Xmas with the same ideal.

I think 2012 is going to be good year for all of us.

Cheers

Yours in Finance

Richard Taylor - richard@tayloredfinancialsolutions.com.au Tel: 07 3720 1888
Residential Mortgage Broker providing structured home loan advice for investors and owner occupiers all over Australia.
Want to live of your rental income? 0-40 properties in a decade. Email me for a copy of my API Magazine interview