Cross-collateralisation & LMI???

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Lou32z
Member
@lou32z
Join Date: 2002
Post Count: 26
February 23, 2006 - 1:54 am
In starting initial investigations into getting finance for a second property, my current bank says that it will provide me with the funding for the two properties (refinancing existing IP to 85%LVR and purchase new IP at 84% LVR). However, they are going to require LMI on both loans (fair enough…) AND they want to cross collateralise the two properties.
Is this unreasonable?
I mean, if im forking out thousands of dollars to insure the bank against me defaulting, then why would they also need me to cross collateralise the two properties as well? Surely LMI is enough insurance for banks?? Or is this just standard practice and Im just going to have to live with it..?
Cheers
Louise
Richard Taylor
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@qlds007
Join Date: 2003
Post Count: 12,024
February 23, 2006 - 3:32 am
Hi Louise
I think i would be talking to a broker and telling your Bank to take a hike.
Why would they won’t the properties X Collaterised ?
I now the answer but you don’t want that for your portfolio.
The other consideration is the LMI rate. If your loan with your current lender is over $300,000 then the MI rate maybe higher than it would be by using 2 separate lenders and having the total loans under the threshold.
A new rate also kicks in again at $500K + so it is important to get your broker to shop around and advise you who has the most competitive LMI rate as well as the other features you require in an IP loan.
Richard Taylor
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Terryw
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@terryw
Join Date: 2001
Post Count: 16,213
March 16, 2006 - 5:16 pm
No reason for the properties to be cross collateralised.
Terryw
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Mobile Mortgage
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@mobile-mortgage
Join Date: 2003
Post Count: 913
March 17, 2006 - 2:18 am
I agree, keep the 2 loans separate, donâ€™t cross collateralise.
Depending on the numbers, current value purchase price etc, it may be more economical for you to have the LMI on just the One loan,
E.g., 1st loan @ 89% LVR & the 2nd loan @ 80% LVR
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Steven
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Mobile Mortgage Market
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PLEASE note comments made should not be taken as specific taxation, financial, legal or investment advice.