Join Australia's most dynamic and respected property investment community

Multiple properties under one loan using splits

Discussion in 'Property Finance' started by dean2012ad, 26th Apr, 2016.

  1. dean2012ad

    dean2012ad Member

    Joined:
    31st Mar, 2016
    Posts:
    20
    Location:
    NSW
    Hi all,

    I am refinancing 2 x IPs
    The broker has offered me 1 loan with 3 splits i.e.
    IP1 : IP1-equity loan : IP2 (ip2 secured against ip1)

    Do any problems arise in this setup, particularly with the sale of one of the properties...?
     
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,174
    Location:
    Gold Coast
    Last edited: 26th Apr, 2016
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,043
    Location:
    Sydney
    Huge potential problems.

    I would avoid this completely.
     
  4. D.T.

    D.T. Adelaide Property Manager Business Member

    Joined:
    13th Jun, 2015
    Posts:
    5,603
    Location:
    Adelaide, SA
    Don't :)
     
  5. Steven Ryan

    Steven Ryan Mortgage Broker Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    2,458
    Location:
    Sydney & Gold Coast
    Run.
     
    Tranquilo likes this.
  6. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    420
    Location:
    Brisbane
    Its good to have more than one lender to keep the offers competitive but if you want to pull out equity for a new purchase administration can be substantially easier
    Example . See a place you wish to buy need $6m.
    1. Cross collatorised One application
    2. Six multiple lenders. Six applications to pull equity out from six banks
     
    Gingin likes this.
  7. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,109
    Location:
    Melbourne, Nationwide
    Worth pointing out that the borrower needs to sign six application forms instead of one. Hardly an onerous task, it's the broker or banker that needs to do the extra work (which isn't the borrowers problem).

    What if you cross collateralise and 3 properties go up by $100k and 3 go down by $100k. The net equity is zero, so no equity release. By structuring correctly, you'd at least have $300k equity to access.

    Cross collateralisation - 10 reasons to avoid

    Crossing is rarely to the borrowers benefit and puts a lot of power in the hands of the lender. It doesn't take that much extra effort but potentially gives you so many more options.
     
    Gingin likes this.
  8. Tranquilo

    Tranquilo Well-Known Member Premium Member

    Joined:
    18th Jun, 2015
    Posts:
    342
    Location:
    Mascot
    Run faster :)
     
    Leo2413 and Terry_w like this.
  9. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,782
    Location:
    Perth WA
    X-coll is the default for many bankers and brokers but it's far from the best way to structure your loans. Most of the brokers here have first hand stories of the devastation that can occur due to poorly structured loans. For the sake of a couple of extra signatures, do it right the first time.
     
    chylld likes this.
  10. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    9,043
    Location:
    Sydney
    Could it be the St George product you are looking at?
     
  11. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

    Joined:
    14th Jun, 2015
    Posts:
    1,173
    Location:
    Adelaide, SA
    You don't gain anything from structuring like this - but lose a lot of flexibility for your investment plans over the long term.
     
  12. dean2012ad

    dean2012ad Member

    Joined:
    31st Mar, 2016
    Posts:
    20
    Location:
    NSW
    The bank is mortgage house.

    The reasons for doing so are probably:
    1) individually each loan is less than $150k and the minimum lend is $150k, together they meet the minimum lend size.
    2) save administrative costs for them and I, i.e. application setup.
    3) ignorance
     
  13. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,109
    Location:
    Melbourne, Nationwide
    They're not a broker, they're a mortgage manager. They get money from other sources, package it under their own brand and sell the loan. There are sometimes advantages to going down this path, but overall these lenders can be risky to the borrower when economies aren't doing so well.
     
  14. dean2012ad

    dean2012ad Member

    Joined:
    31st Mar, 2016
    Posts:
    20
    Location:
    NSW
    I appreciate all your advice.
    You are all fine people who are so kind to share your knowledge with others.

    I will instead have single securities on each loan.
     
  15. dean2012ad

    dean2012ad Member

    Joined:
    31st Mar, 2016
    Posts:
    20
    Location:
    NSW