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2 Loans - 1 Bank - Not Cross-collateralised?

Discussion in 'Property Finance' started by juzzy, 25th Aug, 2015.

  1. juzzy

    juzzy Well-Known Member

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    Hi All,

    By broker says that my loan set up is fine because the equity from my PPOR is a completely separate loan from the one I will have on my IP.

    Both loans are with the same bank however.

    Does anyone foresee any issues with this?

    I suppose if the bank tries to make it hard for me to borrow in the future (which is apparently a problem with using the one bank), I can just move one of the loans over because they are not cross-collateralised?

    Thanks
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Two properties with a single lender doesn't mean they're automatically cross collateralised. That depends on the loan structures put in place.

    If the loan over the second property is close to or greater than the value of that property, they're almost certainly crossed.

    If you've got an equity loan on the first property and you used this as your deposit and purchase costs, or you covered all this with your own savings, and then got another loan to complete the purchase on the second property, you're almost certainly not crossed.


    As long as they're not crossed, I don't see any significant problems borrowing money in the future, outside of the usual challenges we face all the time. Putting a few properties with a single lender is fairly common practice. There's a point where diversification becomes a good thing, but it's rarely necessary to diversify two properties. :)
     
  3. juzzy

    juzzy Well-Known Member

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    Hi Peter,

    You've summed it up with your last paragraph.

    We have used the equity in our PPOR as a 20% deposit for the IP. So the second loan will be 80% LVR.

    Sounds like I should be ok then.

    Thanks!
     
  4. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    @juzzy, sounds like your broker knows what they're doing. :)
     
  5. juzzy

    juzzy Well-Known Member

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    Thank God one of us does, because I have no idea!

    You would think an Accountant with an Economics degree would have a better understanding of money! I'll get there one day.
     
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  6. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    An accountant understands tax.

    An economist understands... In theory they understands how money moves around. I have some observations that lay counter to that claim however. ;)

    Neither has any training in structuring loans to work with banks policies in the investors best interests...
     
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  7. juzzy

    juzzy Well-Known Member

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    I don't even understand tax, I'm a Management Accountant! Good for nothing!
     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    It's fine - it's a common structure. Just check your loan docs only list a single property.
     
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  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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  11. York

    York Finance Broker Business Member

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    That's doesn't mean you're good for nothing. You're a MGT Acc. You focus on a different field of accounting. Tax accountants focus on taxation. You'll have a basic understanding on tax as you'd have covered tax units whilst earning your qualifications. Don't beat yourself up.
     
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