Hi all,
Reading through Steve's book, he made an emphasise on obtaining a seperate mortgate number for every loan, can someone shed some light of the reason for this?
Thanks,
WendyHate to say Wendy if you do this you will very quickly run out of lenders.
The emphasis is on structuring the loan correctly to avoid cross collateralising the loans and where possible reduce your risk exposure. As long as they are done properly I wouldnt have an issue in doing a few with the same lender.
Richard Taylor | Australia's leading private lender
Hi Richard,
I've only read it in the book and I didn't understand, thus the post.
Could you give me an example of a correct structure of loans vs a risky one?
For example if I have one primary residence and three IPs, what would be the best way to structure the loans as to avoid cross collaterialisation? What are the risks involved with cross collateralisation of loans and how to manage such risks?
What do you mean by separate number?
Each loan should only be secured by one property – is this what you mean?
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Thanks terryW, you have asked my question, here, separate number is not clear, I did not understand this too. I hope WJ will answer it soon.
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Fat Loss for Idiots ReviewWJ wrote:Hi Richard,I've only read it in the book and I didn't understand, thus the post.
Could you give me an example of a correct structure of loans vs a risky one?
For example if I have one primary residence and three IPs, what would be the best way to structure the loans as to avoid cross collaterialisation? What are the risks involved with cross collateralisation of loans and how to manage such risks?
Best way would be:
PPOR
Loan A, main loan, with 100% offset
Loan B, separate loan used for deposits for investment propertyIP1
Loan C, IO loan.IP2
Loan D, IO loanetc
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Hi Terry,
Thanks for your answer.
'seperate loan number' was mentioned in the book, Steve didn't elaborate on it except for that he was $10K out of pocket because he didn't have a seperate number. I have no idea what he meant by the term and how it costed him money.
In your previous post you wrote:
IP1
Loan C, IO loan.What's IO loan?
If I'm self employeed, how can I structure my properties in a way that would allow me to continue get loans approved while not building a potential domino of risks, that one failure would cause the whole construction to collapse.
WJ
Very simply have the IP loans to 80% of the market value of the security (probably in the name of a DFT to reduce your liability) with 20% coming from the LOC on your PPOR.
When the properties have increased in value bring the IP loan back upto 80% of the increased valuation paying down the Invt LOC. This in turn can be used again or merely reduce the limit.
Eventually all IP loans will be 100% standalone and your PPOR will totally separate.
This assumes that all loans are full doc if they are lodoc it is going to be a little more challenging.
Richard Taylor | Australia's leading private lender
Terryw wrote:WJ wrote:Hi Richard,I've only read it in the book and I didn't understand, thus the post.
Could you give me an example of a correct structure of loans vs a risky one?
For example if I have one primary residence and three IPs, what would be the best way to structure the loans as to avoid cross collaterialisation? What are the risks involved with cross collateralisation of loans and how to manage such risks?
Best way would be:
PPOR
Loan A, main loan, with 100% offset
Loan B, separate loan used for deposits for investment propertyIP1
Loan C, IO loan.IP2
Loan D, IO loanetc
Hi all, sorry to hijack the post. I am new to property investment too.
Is Loan A, B, C, D have to be from diff bank? or just different loan account within the same bank ?
Am I able to confirmed that I am not CCing just by checking my account number ?Hi
IO = Interest Only
I think Steve was probably recommending loans not be cross collateralised.
Loans can still be cross colleteralised if each loan has a separate number. .
eg. PPOR value $100,000 with a loan of $20,000
IP 1 value $100,000 with a loan of $120,000Each would be a separate loan number, but these loans would be cross collateralised – because the loan on the 2nd one is more than the value.
Maybe Steve was referring to not having one big loan, which is even worse,
eg. Loan 1 $140,000 with 2 properties securing it – PPOR and IP2.The best way to do the above is
PPOR,
Loan 1 $20,000
Loan 2, $60,000 (can be a LOC)IP1
Loan 1 $80,000The loan 2 would be a limit of $60,000 (bringing it to 80% LVR), but the balance would be nil untill you used or withdraw money.
When you find IP1 you take the 20% deposit from loan 2, and you borrow the remaining 80% from loan 3.
This way all loans are stand alone, with no crossing of security.
Loans 1 and 2 must be at the same bank, but loan 3 can be with any lender.Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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