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Cross securitise

Discussion in 'Property Finance' started by Frosty123, 12th Nov, 2015.

  1. Frosty123

    Frosty123 Well-Known Member

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    Hi,

    I currently have a loan with NAB, and have gained access to equity we have in our PPOR. I'm looking at purchasing a new property with the deposit funds that have been drawn down into an offset account (against the new equity loan).
    Is there any issue in having a loan for the new IP with NAB as well? I assume this ok, since my PPOR has nothing to do with the new loan, just cautious about having both with the same lender...

    Thanks

    Frosty
     
  2. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Two or more properties through the same lender isn't an issue, it happens all the time. Just make sure they don't decide to use both as security for the new purchase (which also happens all the time but is unnecessary).
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    not the question you asked, but I assume the only thing in that offset is borrowed funds or rental income ?

    ta
    rolf
     
  4. Frosty123

    Frosty123 Well-Known Member

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    Great. Thanks!

    Yes, the only funds in the offset are those that were drawn down when the equity loan was created.
     
  5. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Just be aware that if you go direct to NAB for the new property, they will definitely want to cross your properties. You'll have to be very specific that you don't want this, and check your paperwork carefully to make sure it's all good before signing.
     
  6. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    1. Ensure that the equity accessed is not a top up but a separate facility/loan account so that you are not contaminating the tax deductibility of the equity release.

    2. Ensure that the properties are not cross securitised

    3. Run the numbers on the purchase to determine if its worthwhile doing the new loan @ 80%, 88% or 90%. Note that NAB direct DO NOT allow for the capitalisation of the LMI premium so this would need to come from your pocket which is a deal breaker (for me anyway).

    4. I would re-consider having the second loan with NAB as well. NAB is a generous servicing calculator and generally we would prefer to use NAB later in the portfolio when you really need the servicing - think of it as an Ace up your sleeve.
     
  7. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    What is the difference with NAB direct and NAB?
    Can only brokers get NAB LMI capitalised?
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    Different sales channels, products are a little different. Brokers can generally write both but there's a variety of reasons we prefer to write through the broker channel (better pay, same rates or better, better service).

    It's no problem to capitalise LMI above 90%, but credit scoring is horrendous and the rates are increased substantially. If you need to capitalise LMI above 90%, there's almost certainly several options which are better than NAB in general.
     
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  9. Taku Ekanayake

    Taku Ekanayake Well-Known Member

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    Thanks for the feedback @Peter_Tersteeg
     
  10. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    NAB Direct and NAB Broker are very different channels. There are pros and cons on both sides of the fence.

    The biggest difference between the 2 channels are that NAB Direct use QBE as their mortgage insurer and NAB Broker use Genworth. The other major difference is that you cannot capitalise the LMI with a NAB Direct loan.

    Having said that a lot of NAB's major niche's are within the sub 80% LVR market anyway.
     
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  11. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Having two properties with NAB isn't an issue - they don't have to be crossed. However - I'd be very surprised if the local banker didn't cross them. They usually don't know any better.

    Just make sure you're very explicit with your instructions when dealing direct with the bank. Double check the application and your loan offer documents once approved too.

    Cheers

    Jamie
     
  12. Redom

    Redom Mortgage Broker Business Member

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    I believe they have plans to be merging Nabbroker and NAB red star in mid 2016 - just trying to work out the product offering they'll keep/maintain and policy settings.

    Main difference is in insurance territory and the subtle differences that those insurers have (rural properties, etc).

    Usually brokers would be writing Nabbroker loans unless there's a specific reason to go to red star (existing customer, policy niche etc).
     
  13. Elives

    Elives Well-Known Member

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    if you had a loan for 90k and were thinking of buying another 150-200k property and wanted a offset account (without paying .5-1% more in interest. could this be a good reason to cross?

    so it'd only be for 2 low end properties and wouldn't be for any other. just so you could get the offset account to store cash. (savings / income)
     
  14. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    @Elives As far as I'm aware, crossing is not going to get you a cheaper offset. If the cost is excessive (for eg paying a $395 package fee for a $90k loan) You'd be better off not crossing and going for a cheaper offset product - for eg Macq white label products that have an offset, good rate and no annual fees.
     
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  15. bread_boy

    bread_boy Well-Known Member

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    I'm with NAB broker and the one thing I've noticed is that NAB broker will charge $10/m admin fee for each split you have whilst for NAB direct it's free no matter how many splits you have.
     
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  16. Omnidragon

    Omnidragon Well-Known Member

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    Banks always want to cross properties. Another big bank tried that on me I shut them down.
     
  17. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    NAB Broker charges $10 per loan account so if you have one account thats $10 per month and thus $120 per annum.

    NAB Direct charges you a flat professional package fee of $395 p/a so if you have one split then you are better off under NAB Broker and if you have 8 splits then you are better off under NAB Direct.

    Having said that I have had up to 6 splits with NAB Brokers charged at a max of $360 p/a.
     
  18. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    In fairness to the "big banks" I have found that most lenders regardless of their size want/try to cross as do most brokers since most come from lending backgrounds.

    Its a combination of its best for the bank or they don't know any better.
     
  19. Foreshadow

    Foreshadow Active Member

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    I understand the point your making Shahin, but I have a question regarding this. How often do factors within the banking industry change the order in which you would use each lender. For example if I were to save NAB for when I have problems with my serviceability in lets say 5 - 10 years time; what are the chances that NAB are still the lender with the best serviceability. I know crystal ball stuff, but just trying to get my head around if the ranking of lender to use translate to real life, instead of just on paper.
     
  20. Shahin_Afarin

    Shahin_Afarin Residential and Commercial Broker Business Member

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    Absolutely there is so much planning you can do but ultimately you are at the mercy of lenders making whatever changes to their policy.

    Having said that though you should always plan and use lenders accordingly to the current policies and conditions. If policies change then so does the strategy and this is one of the reasons I provide to people wanting to fix their loans.