Question on extracting additional equity a second time on same property

Discussion in 'Loans & Mortgage Brokers' started by applesathome, 17th Apr, 2022.

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  1. applesathome

    applesathome Well-Known Member

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    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.
     
    Investor1111 likes this.
  2. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    subject to servicing, and any time embargo a lender may have cant see an issue.

    Cross coll is where more than one property is used as specific security for a loan ot set of loans.

    If the IP loans are secured just to the IPs, and the deposit loans secured to the ONE property, there wont be cross coll usually.

    ta
    rolf
     
  3. Terry_w

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

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    Don’t think extract equity, think that you are borrowing money and things become easier to understand
     
    Peter_Tersteeg and applesathome like this.
  4. Tony Xia

    Tony Xia Structured Loan Advisor Business Member

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    There's no rule to drawing equity out again.

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

    applesathome Well-Known Member

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    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.
     
  6. Terry_w

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

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    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.
     
    Lindsay_W likes this.
  7. Lindsay_W

    Lindsay_W Well-Known Member

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    Sounds like you need a decent mortgage broker
     
  8. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    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
     
    applesathome likes this.

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