Good Afternoon All,
I am looking for some device of either someone who has a good understanding of Cross-Securitisation has been in a similar situation.
I have 3 Residential Investment property in Melbourne. I have been trying to search how to get out of the Cross-Securitisation.
I have been trying to develop my knowledge and understanding with investing in property and realise now that this is a big mistake to structure my loans.Property 1 – Purchased in 2004 – Purchase Price $160,000 – Revalued 2010 $325,000
Property 2 – Purchased in 2006 – Purchase Price $200,000 – Revalued 2010 $250,000
Property 3 – Purchased in 2009 – Purchase Price $300,000 – Revalued 2010 $315,000I am going to contact my lender on how to Uncross-Securitisation, but and hoping to get some advise before i do so.
Thank you for help me.
CK
Hi. Are they all crossed? You neglect to say what the loans are on each. Are they separate loans?
So you don't have a PPOR? More info will be helpful.
You will need to apply for a variation of security.
Each loan will need to be no more than 80% of the value of the property securing it, or LMI would be payable. You may get around the problem with IP3 by setting up an addition loan on IP 1, such as a LOC, which is secured only by IP 1 and then using this to pay down the excess loan amount above 80% on IP3.
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 CK,
Each loan contract has a Security Schedule (usually towards the back). The properties listed in the Security Schedule are security for that loan. If all your loan contracts list all your properties you are fully crossed.
You might only need variations to 1 or 2 depending on when the loans were set up.
Have a look at the schedules.
BankerHi Terry,
I get the idea of avoiding cross-securitisation by taking out a LOC against your PPOR. But by doing this won't you essentially by paying two more interest on you PPOR?
Eg
Current PPOR Value: $300,000
Loan remaning on PPOR: $150,000
Equity: $150,000Investment property: $400,000
Loan: $320,000
Contribution: $95,000Therefore:
Remaing Loan on PPOR: (95,000+150,000) = $245,000Lets say interest was at 5%.
Old loan on PPOR = (0.05*150000)/12 = $625pcm
New loan on PPOR = (0.05*245000)/12 = $1025.83pcmPlease enlightened me as I'm fair new in this area. If you can provide me with an example that would be fantastic.
Thanks
Not really – you are just using the PPOR as security. The interest on the LOC will be for the loan for the deposit and costs of the IP.
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
It still works out to be the same anyway unless the LOC is charged at a lower interest.
LOC: ($95,000*0.05) = $395.83pcm
yes, same interest rate. but you avoid crossing the securities.
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
Wouldn’t the bank still hold both titles if you’re taking a LOC?
one title 2 loans.
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
So let me get this straight Terry. Just say I have an investment property that I bought for 100k a while ago and paid for it all. Current evaluation comes to 220k. Since ten I went out to buy a property investment worth 350k. The bank is willing to lend me 105% therefore total loan comes to 367.5k.
I would want to keep this to around about 80% LVR so I take out a loc 25% from my existing property investment to service the new investment.
Therefore (367.5k*0.25) = $91,875.
Therefore I now have 220,000 – 91,875 = $128, 125 equity left over.With the equity left over am I able to then take out another LOC to buy another property but still still be able to keep my existing title?
So in two loans for the existing property and two loan for the two new property.
I got to say there’s a wealth of knowledge in this forum. Thanks for all the advice.
I think you are slightly confused.
To get the LOC you will need to give the bank the property as security for the loan. But you could then get another LOC on the same property later if you wished. you just have to keep the LVR under the banks limit – usually 80% of the value.
The point is you could use the money from the LOC to pay the deposit and costs for the next property and then go to the same or a different bank and borrow the rest and keep each property separate from the others and the loans not crossed collateralised.
eg
Property A, value $100,000
Loan 1 $50,000
Loan 2 $30,000 (eg. LOC on the available equity)Go out and find property B value $100,000
Loan 3 $80,000The 20% deposit and stamp duty etc comes from Loan 2. Interest on this would normally be deductible.
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
Very well expained Terry that does make sense now. I’m afraid I’m in the same boat as Trying Investor and the bank refuse to change the loan structure prior to settlement.
night if it is an issue i would be suggesting you look at getting your Broker to restructure your loans and look for an alternative lender.
Richard Taylor | Australia's leading private lender
I basically did the loan through the bank rather than through a broker at the time loan looked well structured but now that Trying Investor has mentioned cross securitisation that I realised I made a mistake. Back to the drawing board then. Anyone know if changing the variation of the security would incur a fee? If so how much?
Thanks everyone who contributed and Terry if you’re based in Melbourne I’ll sure as well seek some advice from you when I look at another PR in the future. Keep up the good work mate.
You must be logged in to reply to this topic. If you don't have an account, you can register here.
