Think of the tax issues. If you borrow to buy a main residence, the interest is not deductible. But if you were to borrow to build an investment, it should be. So keeping your cash for the main residence may be more tax effective.

I don't think any lenders try to force cross collateralising loans on people. Some seem to have a policy of trying to do it, but it you insist they should relent – if not, just go elsewhere.

LMI companies often reject loans that the banks would otherwise do. Especially when in comes to small defaults etc. Becareful of where you borrow as some lenders insure all their loans, but pay the premium – the client is often unaware and this can affect later borrowings, especially if the client is wanting to use No/Low Docs/

If you are wrapping, then you are just selling a property with the payments coming in installments.

If you owned the property and were personally sued, then what would happen is the person would get a judgment against you for $X. Once they have a judgment doesn't necessarily mean you will lose everything, or even anything. Depending on how much the judgment is, they can get further court orders to garnish wages, garnish bank accounts, seize property (like cars etc) and force the sale of land owned. But in doing this they would first see what sort of mortgage you have to estimate the potential equity.

With a wrap you have entered a legal contract and have sold the property, but not yet settled. So, I am not entirely sure, but would supsect that your wrapped property may be safe from creditors.

But if your judgment is above $2500 (approx) the person obtaining the judgment could then issue a bankruptcy notice – pay up in 28 days or go bankrupt.

Once you are bankrupt, the bankruptcy trustee steps into your shoes and starts to sell assets in order to pay the debts. I think the wrap contract would still be binding. The only time, perhaps, it wouldn't be is if the lender holding the first mortgage over the property foreclosed upon it. First mortgagees would have priority.

But I am not a lawyer, and am only guessing really.

I think the original idea behind Low Doc loans was that these are for business people who have not had time or inclination to get their tax done. All businesses need an ABN, so this is a good measure of how long a person has been in business.

I don't know of any lender that will lend for wraps (installment contracts). Some have previously threatened to cancel the accreditation of any broker that is involved in submitting deals for wrappers.

So ask your broker will she/he be disclosing this info.

Emil

I am not sure you have your head around the concept yet.

Vendor would usually take out a second mortgage as this is the safest way to protect their money, but you may be able to talk them into not doing this.

Just think of it as having 2 loans.

The bank has the first mortgage on your title and the former owner will have the second one. Keep in mind when you buy a property (settle) the vendor needs to pay his/her loan off.

What you pay the vendor in interest is up to your negotiating skills. I know a developer who is selling properties this way where he will lend the purchaser 15% (and pay their stamp duty) and he is not charging any interest. Others charge something like 10-15% pa.

Here are some good articles covering resettlement issues of discretionary trusts:

If you have debt on your PPOR, pay it off that first, then reborrow it for investment proeprty deposits using No Docs.