Question on extracting additional equity a second time on same property

Hey everyone,

Quick question,

I have an investment property (Investment prop 1), and have already used it last year to extract equity to purchase a recent Investment Property 2.

I am looking to purchase IP3, and my broker tells me there is a bit of equity in IP2, but not a lot, but there is now a bit more in IP1.

Question is, if you've already drawn equity from IP1, can you do it again?
Is that considered cross collatorisation if you use equity extracted from IP1 and it would have helped fund the cash for both IP2 and IP3?

Not sure how common it is to keep extracting equity from the same property if it keeps growing.

Theoretically, the equity from IP1 + IP2 would give me enough to fund deposit and all purchase costs for IP3, which is ideal for me as I don't want to dip into my own cash savings which are offsetting my PPOR.

I'm just a bit unsure though because I've already used some equity from IP1 last year.

 

Don’t think extract equity, think that you are borrowing money and things become easier to understand

 

There's no rule to drawing equity out again.

Hard to tell if it's crossed by what youre saying.

 

I'm not sure I really understand what crossed is which is the problem.

Basically I want to buy IP3, but the equity available in IP2 isn't enough, so I was recommended to take more from IP1 to fund that shortfall. IP1 though, I have previously taken equity to fund the deposit for IP2.

I just can't get my head around it, I don't "think" there's any cross, because the 3 properties will all have 3 separate loans, it's just to fund the deposit of IP3, it will involve taking more equity/borrowing against IP1 again, which I already used to fund deposit for IP2.

 

If you borrow against 2 separate properties, under 2 loans and each loan is secured by one property then this is not crossing securities as only one property has secured by loan one.

So you could have a situation where you had 10 properties with say $20,000 usable equity in each and you borrowed $20,000 under loan A secured by property A, $20,000 under Loan B secured by property B and so on.

You could then use these 10 loans as deposit and buy Property K for $800,000 with a $640,000 loan secured by it and the deposit secured by 10 separate loans.

You would then have 100% loan with 11 splits, no crossing, all secured by just 1 property and all interest potentially deductible.

 

Sounds like you need a decent mortgage broker

 

Yep - shouldn't be an issue providing all else stacks up (your borrowing capacity is strong enough, ect).

No. It would be cross coll if you used IP1, IP2 and IP3 as the three properties to secure your new equity release.

Cheers

Jamie