loan of 105% of property value

The problem is that the value may not go down in market terms but you may and probably will getting a crappy valuation. If the properties are crossed and you want to sell or refinance one property then the bank will order a valuation on the other property/properties and if you get a crappy valuation then you need to leave more at the table with the outgoing bank.

Some lenders will do a full assessment of your application once you do a partial discharge which means if you don't service the loan with that lender and are on say interest only repayments then the lender can force you to jump onto P&I repayments which may be detrimental to your cash-flow.

 

I doubt any of nathans properties were 15km and cashflow neutral from day 1 unless it was fired

I asked nathan when he came to melb to show me a cashflow neutral property thats relatively metro and he gave me some vague answer thay didnt answer the question. In the end he offered me a property on his dealfinder for free. I said no thansk

He has the regional approach like me. Well he used to. Not sure now

 

With x-coll the bank holds all the cards, without, you hold at least some. Why would you ever choose to x-coll if you didn't have to?
Is not just about values, it's about control - you can have the best strategy in the world but if the bank decides you don't comply with their risk profile you're stuffed. Consider what might happen if you're self employed, or hold unusual security, or have investments in mining towns, or lose your job, or come on hard times in any way.

I have seen first hand the pain and anguish x-coll can cause. Advising x-coll when there are other perfectly good ways to structure the deal is naive at best - i simply don't think they understand the implications of what they're recommending.

 

i purchased 5km from Brisbane CBD, CF Neutral & borrowed 105% using a family guaruntee product from WPAC. Not sure if this is something you would consider but worth mentioning none-the-less.

 

You mention not to Xcoll if you don't 'have to'.....which situation would you have to XCOLL?

 

If you have an extremely tight deadline that doesn't allow time to do a LOC then mortgage on the property. Best to get LOCs up and running before you go IP shopping.

 

when you dont have deposits, or when the LVR is too high

I think there is a place and a time for Xcoll,

to me its like a cost of doing business, like LMI, if you cant afford 20% then LMI is something you need to get the fiannce

 

Even with no deposit you can still pull out equity from another property and fund the 20%. If the LVR is too high on first property, won't be able to use collateral anyway.

 

Details on your buy please! Suburb, unit townhouse or house etc

 

I have had to in the past. I would not do it again. Here is the situation: 2 investors with 2 IPs with nearly a million in debt of low doc loans at an average over 9% interest. This was only about 4 years ago, so that interest rate is massive. I wanted to refi to full doc at an interest rate of around 6% and concurrently purchase a third IP. No lender would touch that except AMP under 2 conditions. The loans were to be a fixed interest rate and to cross collateralise an unencumbered main residence with the new IP purchase. My broker was really good about explaining the risks and disadvantages of cross collateralisation and left it up to us to decide to proceed. We did and uncrossed as soon as possible after that. For us, dropping the interest rate from over 9% to around 6% was a huge deciding factor. In our case, the new IP increased a lot in value so were able to refinance down the track and take the main residence off the loan for the IP. It could have been a lot different though. If things had gone wrong and the bank called in the loan, we could have lost the main residence. It was definitely a gamble. I could not reccomend anyone else do that.

 

Wow...nice example. Thanks for sharing. There was a huge rate difference so I can understand why you wanted to refinance.
Just wondering though, why disn't any of the big boys want to touch it?? Also I assume both IPS had super high LVRs??

 

good point!!

 

when did you purchase and what type of property was it / where?

 

2 reasons generally:
1. As Westminister put it - the clock doesn't allow you to set it up quickly enough.
2. Family guarantor loans. In saying that, you can set up in a way to clear/partial discharge. E.g. 1 split for 80% at I/O, other split for 25% at P/I. Once value increases or paid down, partial discharge the guarantors security out. This is a fast growing product, particularly for FHOB in Sydney. Incomes generally not the issue, its the deposit.

 

I purchased in Late December, 2014. 2 bed, 1 bth, 1 car unit 80's built unit in low density block. Located on border of Taringa & Indooropilly , Brisbane.

 

Good choice of suburbs. If not confidential- how much ?

 

Purchase price $400k
Rents @ 450pwk.

 

how much was body corp?

 

Body corp = $570 p/q
Rates = $290 p/q

Also got @BMT Tax Depreciation to do a dep. report which gave me $24k in depreciation over the next 5 years.

The numbers stacked up well so i offered 5% over asking price with 21day settlement without sighting the unit.