Forums / Getting Technical / Finance / Refinancing to LOC – How do I overcome resistance from Bank

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  • Profile photo of abbruzziabbruzzi
    Join Date: 2006
    Post Count: 19


    My Melbourne Investment Property has increased in value, I believe (based on a similar property that just sold 3 doors down last week). I think this is a good reason to get a revaluation on my property now.

    It is cross-colateralised with my home.

    Option 1. I want to get the IP valued by the bank and then uncross it from my home because I beleive the IP can now stand alone with a LVR that will satisfy the Bank 80%LVR.

    I have asked the bank manager how much this will cost and she said $200 for the valuation and $350 to split the two properties.


    1. Bank maanger is strongly trying to persuade me to Option 2.keep the propeties crossed and any increase in Melbourne IP can be used as deposit for new property. Is this perferable to just spliting the properties and not having extra equity for depsosts. The bank would only allow 3 months window for me to find another propery vs LOC can take my time.

    2. The Melbourne IP is on a fixed loan that I do not want to break. Could I get the equity from the revaluation and demand the bank give me the equity so that I can transfer it into a LOC I have already set up on a 3rd property. Thus no need for set up costs for another LOC.

    3. Will putting money into the LOC affect the status of that LOC. ie tax deductibilty?

    I am not in a hurry to buy another property and am weighing up the options of 1. uncrossing propertys 2. leave propertirs crossed and take equity out to put in existing LOC/set up new LOC.

    Any advice or insights much appreaciated.



    Profile photo of sienna1sienna1
    Join Date: 2007
    Post Count: 47

    my answer would be to step away from the banks. they are snakes and very inflexible. go to a online lender or mortgage broker.

    Profile photo of Richard TaylorRichard Taylor
    Join Date: 2003
    Post Count: 11,937


    Sorry to be sarcastic but of course your Bank Manager has tried to persuade you to keep the properties cross collateralised as it will benefit the Bank and possible even her own pocket.

    Many lenders offer incentives for their branch staff to X collateralise your securities so listen not.

    My suggestion would be to go ahead as you mentioned and ask them to value the IP and set up the line of credit behind the current fixed rate loan. If the loan was under a Pro package it wouldnt normally cost you anything to revalue and split the securities so tell her is this an option.

    Make sure they separate the 2 securities and then have your rent and income going into the offset account linked to your PPOR loan to maximise your interest savings.

    Drop us an email if you need any more information.

    Richard Taylor | Helping investors pay down their debts thru a Mortgage Trust investment
    Email Me | Phone Me

    0-40 Properties in a decade with a unencumbered portfolio value in excess of $26M. Ask me for a copy of my API Interview.

    Profile photo of v8ghiav8ghia
    Join Date: 2005
    Post Count: 871

    I'm going to humbly offer some words of wisdom – NEVER EVER cross secure properties for any reason UNLESS you only even plan to buy two, and are never going to sell either of them!

    With what can be quite severe decreases in property values, you will not be allowed to use the sale proceeds of a property that was cross secured as you would like – and while there are plenty of bankers/brokers/lenders/whatevers with more hands on experience than I have (or will ever have if I get out of the industry – sooner rather than later I hope!) when a property that is cross secured with another is sold (much worse if there are 3 or 4 done this way) it is an absolute nightmare for all concerned. Tears all round.  Really. Regardless of the bank, a good lender would never normally suggest crossing your properties (bank managers do not have a lot of hands on lending experinece often remember – either dare I say the vast majority struggling to pay off their own pmortage, and no investment experience whatsover) together if you share your investment ideas with them, and a capable broker should not do so either – excepting of course the above scenario.  Of course, this is purely my opinion, but maybe you shoudl either look elsewhere, or mention that you are and that 'the ANZ will do it' or "I've spoken to th CBA' whatever, and I'm sure they will come around. All the best.


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