All Topics / General Property / Downside of Cross Collateralised Loan

Viewing 8 posts - 1 through 8 (of 8 total)
  • Profile photo of TongTong
    Member
    @tong
    Join Date: 2010
    Post Count: 14

    Hello Everyone,

    As I am starting to look for my first investment property, I realize how little I really know and how much there is to learn out there.

    I want to start this topic to discuss the potential downsides of cross collateralising when it comes to obtaining bank loans. I think one of the difficulties is the additional costs to valuate all the properties that are a part of the one loan.

    I am hoping to shed some light on why one should not structure a loan with the properties cross collateralize.

    Thank you,
    Tong

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Tong i think you have my emailed list 10 reasons and since doing so 3 more have come to mind.

    Bit suprised your mortgage broker didnt point out the pitfalls but then saying that maybe i am not.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of TongTong
    Member
    @tong
    Join Date: 2010
    Post Count: 14

    Three more reasons? I’ll email you for them. Reading around the other forum topics, I find that crossing coll. loans is not the way to go.

    Thanks,
    Tong

    Profile photo of Jamie MooreJamie Moore
    Participant
    @jamie-m
    Join Date: 2010
    Post Count: 5,069
    Tong wrote:
    Three more reasons? I'll email you for them. Reading around the other forum topics, I find that crossing coll. loans is not the way to go. Thanks, Tong

    Yep, steer clear of it – it can get real messy. Especially if you're looking to purchase more than a couple of properties.

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of Kaz YoungKaz Young
    Participant
    @kaz-young
    Join Date: 2010
    Post Count: 25

    Hi,

    This is a really interesting topic.  Having multiple properties purchased using equity from other preoperties we do have some degree of cross collateralisation in our loans in order to achieve that.

    I'd love to hear some of your strategies on using equity to purchase investment properties whilst steering clear of cross collateralisation if you wanted to share them?

    Cheers,

    Kaz

    Profile photo of Richard TaylorRichard Taylor
    Participant
    @qlds007
    Join Date: 2003
    Post Count: 12,024

    Kaz

    There is absolutely No need to cross collateralise the securities even though you are using equity in 1 property to fund the deposit on another.

    Shoot me an email and i will let you have my 10 Reasons not to cross collateralise your loans factsheet.

    Cheers

    Yours in Finance

    Richard Taylor | Australia's leading private lender

    Profile photo of Kaz YoungKaz Young
    Participant
    @kaz-young
    Join Date: 2010
    Post Count: 25

    Hi Richard,

    Thanks for your response, my error – we are not cross collateralized – as in we do not offer more than one property as security.
    I will send you an email as I'd be interested to chat some more about the topic with you.

    Cheers,

    Kaz

    Profile photo of CatalystCatalyst
    Participant
    @catalyst
    Join Date: 2008
    Post Count: 1,404

    Use equity in one property for deposit, legals etc then have a stand alone loan for 80% (or 90% if you are that way inclined) on the new property.

    Value up and pull the extra equity out to pay the deposit and legals on the next property. Get another stand alone loan for that IP.

     Repeat, repeat, repeat until you reach the LVR you are comfortable with.

Viewing 8 posts - 1 through 8 (of 8 total)

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