Cross /Joint Collateral : CBA

Discussion in 'Loans & Mortgage Brokers' started by Pumpkin, 15th Jun, 2017.

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  1. Pumpkin

    Pumpkin Well-Known Member

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    Hi Pc'ers: someone has an issue below and would love to hear some experienced people opinion.

    The person has 2 loans with CBA over 2 properties: one PPOR and one IP. It started with the same interest rates about 10 years ago so the loan carry same rates. But lately one has higher interest rate so they realise these are different loans (PPOR and Investment). Funny....

    They are now thinking of selling IP#1 and buy a IP#2, sea-change. But the concern is CBA will terminate both the loan facilities. Even terminating one facility is bad b'cos they dont want to apply but hope to maintain the facilities.

    Had talked to CBA several times several places but it's still unclear. The ideal scenario is sell IP#1 and buy IP#2 on the same day, and just swap the security. But fear IP#1 Buyer would need the property fully cleared and CBA might need to release the security......

    Looking forward to your ideas. Thanks heaps!
     
  2. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    This is called cross collateralising securities. Now the bank has the power over the settlement proceeds. If the person wants the mortgage discharged the bank may say they will only do it if all the proceeds are used to pay down the remaining loan.

    Substitution of security may be a possibility and this could be with a term deposit if the settlement of the sale needs to occur before the new purchase settlement.
     
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  3. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Have you had valuations done over the properties? Depending on what the properties are and the LVR involved, it could be simple or difficult.

    Why don't they want to apply - is it a servicing matter?
     
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  4. Pumpkin

    Pumpkin Well-Known Member

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    Sounds like difficult.. .the Bankers responded in some Alien UFO language... doesnt sound straightforward....
    As for applying for loan (again), dont think anyone would enjoy the process. It's lengthy, painful, costly and most of all, might get rejected!
     
  5. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Your friend has had some lousy advice in the past regarding their loan structuring and now they're seeing the consiquences of that bad advice.

    Cross collateralisation - 10 reasons to avoid

    Even when peoples goals are simple, bad structuring can cause unnecessary pain and cost years later. Your friends might do well to get advice from one of the brokers on this forum. There are several that operate in Brisbane or nearby.
     
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  6. Pumpkin

    Pumpkin Well-Known Member

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    Thanks for the link, will forward.
    Just a note, they may have got a good advice, at the time. This is about ten years ago so things changed.... The loan balances are very minimal now and hence they want to maintain the facilities. but CBA may not like it ...
     
  7. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    Things really haven't changed. That list was originally written in 2005.
     
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  8. Jess Peletier

    Jess Peletier Mortgage Broker & Finance Strategy, Aus Wide! Business Member

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    Without the whole story it's impossible to tell you how hard/easy it will be. If they're concerned they should get a broker to have a look first and let them know rather than going straight to CBA and potentially kicking the hornets nest.