Loan Tip: Uncrossing Crossed Colleralised loans

Discussion in 'Loans & Mortgage Brokers' started by Terry_w, 26th Jun, 2015.

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  1. Richard Taylor

    Richard Taylor Well-Known Member

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    Yes seem to spend most of my time these days re-structuring clients loans.

    Always a good idea to plan ahead and uncross your loans before you venture out and look to buy again.
     
  2. Jess Peletier

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

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    The bank manager won't be interested - it's not in his interest to be. What LVR are your loans? If they are high LVR they won't uncross without additional equity being put in, or you'll be up for LMI costs.
     
  3. bonanzawealth

    bonanzawealth Well-Known Member

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    is this considered cross collateral?

    All in one lender.

    Property A 500,000 value
    Loan A 300,000
    Loan B 100,000 used to buy property B

    Property B 500,000 value
    Loan B 100,000
    Loan C 400,000
     
  4. Terry_w

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

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    Not if property A secured loan A and B
    And
    Property B secured loans B and C.

    But if loan B is secured by both property A and B then yes this loan is cross collateralised.
     
  5. bonanzawealth

    bonanzawealth Well-Known Member

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    great! thanks @Terry_w!

    If there's a quiz show with loan, finance, legal knowledge base, it seems you're always the one who presses the button first before the question even finish.
     
  6. Terry_w

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

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    That would make a great TV show!
     
  7. Colin Rice

    Colin Rice Mortgage Broker Business Member

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    I would do it all at the same time, that is uncross and refinance to another bank if applicable.

    The NAB manager would have xcoll so many loans that he/she probably can not fathom what the issue is as "this is the way we have always done it". Why would you let someone who seems apathetic about helping you, help you???
     
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  8. Terry_w

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

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    I uncroosed some client loans with nab. It took about 4 months to get thru and then they upped the rates. This took another month or so to fix.
     
  9. tobe

    tobe Well-Known Member

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    Refi and restructure the lot generally. Unless one or more is fixed or high LVR.
    It can get messy trying to take one at a time, and takes twice the time you think it will.
     
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  10. Terry_w

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

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  11. Terry_w

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

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    I think the title to this thread is wrong. It is not the loans that are crossed but the securities.
     
  12. Martinez22

    Martinez22 Well-Known Member

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    While you are at it access the equity to 80% LVR
    Property A is worth $750,000. 80% = $600,000
    $600,000 is the total available loans that would be secured against property A keeping the LVR at 80%.
    Loan A is $360,000
    Loan C is $64,000
    These total $424,000 so the amount of available equity to use would be $600,000 - $424,000 = $176,000

    Whats the advantage of doing this?

    So you wouldnt draw down on the loan but there would be a tax advantage? Or does it offset one of the loans somehow? Sorry confused with this part
     
  13. Martinez22

    Martinez22 Well-Known Member

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    Whats the advantage of doing this?

    So you wouldnt draw down on the loan but there would be a tax advantage? Or does it offset one of the loans somehow? Sorry confused with this part @Terry_w
     
  14. Terry_w

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

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    You could set up a new loan ready to be used at some point in the future.
     
  15. Brickedup10

    Brickedup10 Member

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    My investment property is coming off a fixed rate and the LVR is approximately 83%.Looking to refinance to an IO variable rate.One of the banks is offering a much improved rate if I bring over my PPOR as well which has a 70% LVR.He mentioned that he would cross both the properties.
    The IP loan is about 1 mil so will save a bit if the rate on offer is good.
    Would this be an good example of crossing 2 properties?
     
  16. Terry_w

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

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    Yes that is crossing securities whether it is good or not will depend on a few things I think.
     
  17. Peter_Tersteeg

    Peter_Tersteeg Mortgage Broker Business Member

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    This is cross collateralisation and it's completely unnecessary in this scenario. The bank is trying to stitch you up in an unfavorable structure. The carrot is a better rate, which given the behavior of all of the big banks over the last year, probably won't be that good within a few months.

    A better solution would be to reduce the loan against the IP down to 80% LVR, increasing the loans against the PPOR by the same amount to compensate. Keep the increase in a separate split to maintain isolation of deductible and non-deductible debt.

    There's no reason you shouldn't get the same rate (or a better rate with a second tier lender) and the structure will work in your favor in the long term. You could even incorporate a little debt recycling into the mix to pay off the PPOR faster.
     
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  18. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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  19. Terry_w

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

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    I let the client decide. A few of my clients have crossed securities to get a better rate. I warn them of the risk, which mainly relates to retirement rather than default I think.
     
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  20. flosed

    flosed Well-Known Member

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    I have an approved but not settled application cross 3 securities with NAB. (broker did it wrong)

    So 3 accounts each secured by 3 properties.

    I want to uncross them as soon as they settle. Will loan accounts need repricing. Or I should expect the same rate.

    Thanks!

    PS: scared by above post from Terry
    "I uncroosed some client loans with nab. It took about 4 months to get thru and then they upped the rates. This took another month or so to fix."
     

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