Cross Collateralization Loan [Do Not Make This Mistake]

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Mortgage Broker Australia - Hunter Galloway

Күн бұрын

Cross Collateralization (or known as Cross collateralisation in Australia or even sometimes cross collateralised loans) means more than one property is used to secure a loan or a number of loans. As a result, you could lose more than one property if you were to default on your mortgage repayments, therefore it is important for property investors to understand the benefits and risks that come with this loan structure.
00:00 Cross Collateralization Loan [Do Not Make This Mistake]
01:06 1. What Is Cross - Collateralization?
02:08 2. What Are The Draw Backs?
03:53 3. How Can I Avoid Cross - Collateralization?
05:14 4. Mock Example
06:25 5. How Could A Separate Structure be More Beneficial?
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Hunter Galloway: Mortgage Broker Brisbane
Head Office: 3 Latrobe Tce Paddington QLD 4064
PO Box 841, Paddington QLD 4064
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Hunter Galloway are an Award Winning Mortgage Broker based in Brisbane. We help clients from our local area, Australia, and all over the world. We believe buying a home should be stress-free and uncomplicated, and we will work for you to make your dreams become reality.
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Here’s a basic example of how cross collateralisation works. Say you want to buy an investment property and currently have a house worth $600,000 with no home loan. This means you would have $600,000 worth of equity.
You then decide to buy a $500,000 investment property but you don’t have the $100,000 for a 20% deposit. So, you use the equity in your home as security for the $100,000 deposit and your investment property as security for the $400,000 loan.
This means you have a $500,000 loan with the one lender that is secured by two assets, your home and the investment property. This is how cross collateralisation work
What are the possible benefits?
Cross collateralisation allows you to use equity in one property as a deposit for another investment property, however it is important to weigh up the risks associated with this approach. Here are some of the potential benefits:
You don’t necessarily need to wait to save up a deposit for an investment property
You can unlock the equity you hold in your home or investment properties should you wish to grow your portfolio.
You may be able to negotiate favourable loan terms, such as a lower interest rate, when you have a higher loan amount with a single lender
You may find it easier to manage your account and fees because you have one lender, as opposed to if you were to take out two separate loans with different lenders
You may be able to lower your loan to value ratio (LVR) by offering a second property as security on the loan which may increase your chances of getting a loan
What are the drawbacks?
It’s important to understand the risks you take on as a borrower when deciding on any loan structure. When it comes to cross collateralisation, you are tying yourself to one lender and with that can come some drawbacks, including the following:
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Пікірлер: 26

@MortgageBrokerAustralia 4 жыл бұрын

For heaps of free home buying tools and resources check out www.huntergalloway.com.au/hub

@Jindarella_ 4 жыл бұрын

These videos make me realise the benefits to having a mortgage broker, AND doing your own research. Thanks HG. Ps. My book arrived yesterday, thank you!

@MortgageBrokerAustralia 4 жыл бұрын

@Ms Jindarella, thank you so much that means a lot to us!! Hope you enjoy the book, and any other questions let us know. Cheers, Jayden.

@georgiachristinel5688 3 жыл бұрын

Keep up the great work guys!

@MortgageBrokerAustralia 3 жыл бұрын

Thanks! Will do!

@myroslavmot 3 жыл бұрын

Thank You

@MortgageBrokerAustralia 3 жыл бұрын

You're welcome

@francismoana9486 4 жыл бұрын

I just recently purchased an investment property and found out that it is cross collaterised. What is the best way to get it to a stand alone investment property?

@MortgageBrokerAustralia 4 жыл бұрын

Hey Francis, damn. You’ll have to get the properties re valued and pretty much do a new loan application (even though you’re with the same bank) to seperate it back out. If you’ve had to pay Lmi you’d potentially have to do it again but Happy to have a quick look at it for you shoot me an email and I’ll explain options and next steps Jayden.vecchio @ huntergalloway.com.au

@jay2aussie 3 жыл бұрын

But if my 1st property is my PPR then the interest on the deposit loan I take out of equity in my PPR isn’t tax deductible? If I cross collateralise in order to take out the entire purchase amount of the new property, then 100% of the interest is tax deductible because it’s an investment. Am I missing something?

@MortgageBrokerAustralia 3 жыл бұрын

Thanks Jay, great question. Might be an idea to speak with a tax accountant as we're unable to give taxation advice. From a very general point of view, the tax office look at the purpose of the funds rather than which property the funds are secured on. Effectively if you use an investment property to borrow money for a personal use, the tax office won't count that as deductible. However, always best to speak with an accountant where they can assess your personal position and provide the right advice.

@198746779838 3 жыл бұрын

Im not 100% sure but i think one of the main points of seperating your mortgages was missed. If you have 3 properties that are cross securitised and you want to sell one of them to buy another property the bank has a right to take that money and pay off your other liabilities or houses. You may not get the full amount the house sold for. The banks are tricky so ensure this isnt the case with your bank before anything else.

@MortgageBrokerAustralia 3 жыл бұрын

Yeah exactly having the properties stand alone gives you more control over your properties when you go to sell/refinance in the future.

@yiannistavrou6588 2 жыл бұрын

Is there a situation in where you can borrow more than the purchase amount of property b? I'm assuming based on the equity in property a

@MortgageBrokerAustralia 2 жыл бұрын

Thanks Yianni, that's right. Provided there is equity, you'd be able to borrow more than the purchase price no drama's.

@MortgageBrokerAustralia 2 жыл бұрын

Thanks Yianni, that's right. Provided there is equity, you'd be able to borrow more than the purchase price no drama's.

@MortgageBrokerAustralia 2 жыл бұрын

Thanks Yianni, that's right. Provided there is equity, you'd be able to borrow more than the purchase price no drama's.

@AssadHamid 3 жыл бұрын

If a person has fully paid property, how that can be beneficial to get mortgage approval for other one. (If the owner do not have any job or self employed from few months.)

@MortgageBrokerAustralia 3 жыл бұрын

Hi @Assad Hamid great question. At the moment it may be of no benefit due to responsible lending laws. Essentially this means lenders need to prove they're lending responsible. So, even though you might own a property valued at say $1,000,000 and only looking to borrow $100,000. Under responsible lending legislation the lender need to prove they're lending responsibly. Meaning the applicant is able to afford the loan. So, if the applicant didn't have an income, would be considered lending responsibly, even though the bank has nothing to lose (because they have a property worth $1m, worst case they just sell it)! This all might change next year as legislation looks like it'll be removed.

@AssadHamid 3 жыл бұрын

@@MortgageBrokerAustralia Thanks alot for your time

@a.r.jackson4590 3 жыл бұрын

Hi @Assad Hamid did you find anything more out? I'm in a similar boat. Unfortunately, I can't do a refi on my free and clear home, because I can't show proof of income 🤦🏾‍♀️

@AssadHamid 3 жыл бұрын

@@a.r.jackson4590 yes i find but cant disclose hare.

@officialspock 3 жыл бұрын

How do I make sure banks/broker wont do this cross collateralisation?

@MortgageBrokerAustralia 3 жыл бұрын

Effectively they'll need to do two separate applications, so there will be 2 application reference numbers. Also check out: www.huntergalloway.com.au/cross-collateralized/

@peterkoulogeorgiou4895 4 жыл бұрын

Whene properties go up for many years equity was never a problem it was serviceability and whene you have that problem you don’t get the loan. Banks work on both something that you guys on making videos never mention and I don’t know why.spriukers

@MortgageBrokerAustralia 3 жыл бұрын

Thanks for watching!