All Topics / Help Needed! / Portfolio Package & Cross collateralised

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  • Profile photo of JustinmGJustinmG
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    @justinmg
    Join Date: 2020
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    Hey guys,
    please Feel free to correct me if I’m not making sense.
    While listening to a podcast today I came across a lending product called a “portfolio package” from the private/business division of the bank.

    Would using this portfolio/investors package from the bank be cross collateralising the assets? Which I’ve been told is a big no.

    thanks

    j

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,213

    Cross Collateralising refers to using 2 or more properties as security for 1 loan.

    Portfolio packages don’t necessarily involve crossing security but it will depend on how it is set up.

    There is one well known ‘promoter’ that encourages the use of the St G Portfolio product which is just a big LOC

    They way they suggest is terrible and involves crossing securities.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of BennyBenny
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    @benny
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    Hi Justin,

    It would really depend on whose “portfolio package” it is, and just what it entails.   A bunch of years back, I took a portfolio package with one of the big 4, and found out afterward (my dd was shameful !!) that it was charging me a higher rate than Standard Variable so I unwound a lot of it.  It had other benefits, but the over-high Interest Rate initially left a bad taste in my mouth for many years.

    Check first before signing up !!!   Don’t be dazzled by all the “key phrases” they say that make things sound Mickey Mouse – do your DD on them.

    Benny

    PS  Edited later>>>>   And I recall that cross-collateralisation was also their “default” position (it is better for the bank, but not so good for you).  We had to re-affirm that we wanted NO cross-colls at all.   They listened, but if we hadn’t insisted, it might have been different, so watch out.

    • This reply was modified 4 months, 1 week ago by Profile photo of Benny Benny. Reason: Additional comment re cross-coll !!
    Profile photo of JustinmGJustinmG
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    @justinmg
    Join Date: 2020
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    Thanks @benny & @terryw

    I appreciate the help

    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
    Join Date: 2021
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    Hi J,

    Here’s two QUICK videos which explain what ‘cross collateralisation’ is,’ how it works and what ‘loan types to avoid’, then the dangers of ‘cross collateralisation’ … you’ll be able to make your own mind up after this, I guarantee you.

    VIDEO 1:  https://youtu.be/red4RU_B-CQ

    VIDEO 2: https://youtu.be/CLslqC4khAE

    Enjoy!

     

    Profile photo of JustinmGJustinmG
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    @justinmg
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    Hey Chris, that was informative although video one says “demand a non recourse loan” which is not cross collateralised…… and then dot point 2 in video two when stating what to ask your broker says “I don’t want a non recourse loan”.

     

    • This reply was modified 2 months, 1 week ago by Profile photo of JustinmG JustinmG.
    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
    Join Date: 2021
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    Hi Justin!

    Good pick up, fixed and re-uploaded: https://www.youtube.com/watch?v=cj0Q471agbc

    You definitely “WANT” a non-recourse loan!

    Cheers!

    Profile photo of TerrywTerryw
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    @terryw
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    You definitely “WANT” a non-recourse loan!

    Why?

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
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    Pretty straight forward: https://www.youtube.com/watch?v=cj0Q471agbc&t=31s

    I said ‘want’… if you’ve got no choice, you’ve got no choice.

    Possibly a better interest rate, possibly some tax benefits VS losing flexibility,  possible troubles with equity pull out etc etc

    Again, I said ‘want’…  if you still disagree, add up the amount of ‘mortgage broker’ , ‘seasoned investors’ and ‘property gurus’ articles and videos who say don’t do it VS…. do it.

     

    • This reply was modified 2 months, 1 week ago by Profile photo of chrisdusting chrisdusting.
    Profile photo of TerrywTerryw
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    @terryw
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    I think you might be misunderstanding what ‘non-recourse’ means. You might be referring to a loan secured by one property? A non-cross collateralised loan. This is different to non-recourse which means the lender only has the ability to claim against property held as security for the loan.

     

     

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
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    Non-recourse loan – https://drive.google.com/file/d/12pG3t2KUja7A3zQLMvLctt6YarNgfmzD/view?usp=sharing

    Is a non cross collateralised loan not a non-recourse loan.If it doesn’t come under this umbrella specifically, I’ll make adjustments in the notes. I still don’t ‘want’ a loan that if I default they can go after my other assets :) All good, thanks for the feedback.

    • This reply was modified 2 months, 1 week ago by Profile photo of chrisdusting chrisdusting.
    • This reply was modified 2 months, 1 week ago by Profile photo of chrisdusting chrisdusting.
    Profile photo of TerrywTerryw
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    @terryw
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    Like that article says they are very rare in Australia.

    I have been a broker for over 20 years and have never seen a non-recourse loan for residential property other than for SMSFs.

    They just don’t exist. There used to be some available for commercial property at around 30% LVR. Not sure if they still are.

    Here is an article I wrote which explains that even with a loan that is not cross collateralised the lender can still come after the borrowers other assets.

    https://www.propertyinvesting.com/topic/5071821-can-a-lender-come-after-other-assets-of-a-borrower/#postnewtopic

     

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
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    Rare but don’t exist? …. want… haha  all good I know what you’re saying, I guess that’s where buying in a trust etc will only protect you, that I know for a fact as I’ve been through it. Thanks again Terry, looks like I’m editing the video a second time today. Avoid cross collateralisation and set your property ownership up right, cheers

    Profile photo of TerrywTerryw
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    @terryw
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    Buying in a trust won’t protect you either though. if you are the trustee you will be personally liable for the trust debts, the trust assets and your personal assets will be at risk.

    If you have a company as trustee the company’s assets and the trust assets will be at risk. But the lender will want a personal guarantee from all directors so the directors personal assets will also be at risk.

     

    BTW, how long does it take for you to make a video like that? I would think about 8 hours or so all up.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
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    Terry, you were the expert until the last post :) I went bankrupt from 2011-2014, I lost the one property in my own name, the other 5 were not touched as they were bought in a trust so have to disagree there as I’ve been through it. Liquidator was worrels in Brisbane. But anyway, to make a video like that , maybe 6 hours script writing, 1-2 hours shooting and then about 7 hours editing… add another 40 minutes if I got to trim a bit for the firsT time like today :) and your still the expert I know what you mean by trust the other way round going personal.

    • This reply was modified 2 months, 1 week ago by Profile photo of chrisdusting chrisdusting.
    Profile photo of chrisdustingchrisdusting
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    @chrisdusting
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    And I’ll hit you up for confirmation on any future ‘finance’ vids if that’s ok :)

    Profile photo of TerrywTerryw
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    @terryw
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    Terry, you were the expert until the last post :) I went bankrupt from 2011-2014, I lost the one property in my own name, the other 5 were not touched as they were bought in a trust so have to disagree there as I’ve been through it. Liquidator was worrels in Brisbane. But anyway, to make a video like that , maybe 6 hours script writing, 1-2 hours shooting and then about 7 hours editing… add another 40 minutes if I got to trim a bit for the firsT time like today :) and your still the expert I know what you mean by trust the other way round going personal.

    Yes, I was probably not thinking about this sort of thing when I wrote the above. There are 2 aspects to trusts and asset protection

    a) you personally become bankrupt

    b) the trust itself is sued – the trustee actually.

    If you personally become bankrupt assets you hold on trust are generally not available to creditors.

    If you as trustee are sued your personal and trust assets will be available to creditors. But assets held in separate trusts would be generally ‘safe’.

     

    So if you set up a trust, perhaps have a company as a trustee and give a personal guarantee, if the trust doesn’t pay its loan they could come after hte property used as security for the loan. If this is not enough to satisfy the debts the other assets of the trust, if this is not enough then your personal assets.

    If there were separate trusts with also personal guarantees from you, the assets of these trusts would generally be safe.

     

    if on the otherhand, you are sued for something personally, such as defamation or negligence then they generally could not get at assets held in a discretionary trust, even if you were the one that controlled it.

     

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    https://terryw.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://Terryw.com.au/

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