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Suncorp releasing property

Discussion in 'Property Finance' started by smallbuyer, 1st Feb, 2016.

  1. smallbuyer

    smallbuyer Well-Known Member

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    Hello,
    A Friend of mine has 2 properties with Suncorp that are very unfortunately crossed on the one loan. They where hoping to sell one and keep the other.
    Unfortunately the one they want to keep has dropped since they got the loan (this one is expensive the one they are selling is cheap). It the one they are selling was previously valued at $100k by the bank is it likely they could just pay back the $80k (lvr is 80%) and be done with it or will the bank want to reval the other house get the total val to 80%?
    House has dropped a fair bit so they may have to fork out 50-100k (which they dont have) on top of the sale price for the cheaper house to get the lvr to 80%
    I imagine quite a few people in mining regions have this type of problem.
    Also how would other lenders likely treat this scenario?
    Any ideas?

    Cheers
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    All lenders will treat it the same unfortunately - they'll take the funds from the sale, use them to pay down the loans to the point they're comfortable with, and then give you the change if there is any.

    The lender will revalue the remaining property and work out how much they need to release the second security. If your friend rings Suncorp to request a payout figure they'll see how much they may need to chip in.
     
  3. smallbuyer

    smallbuyer Well-Known Member

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    Thanks for your reply Jess, what about if in order to reach 80% based on the new val of the remaining property even while taking all sales proceeds their still needed to put another 50-100k put in to make the total 80%? Would they take the full proceeds of the sale or would they demand the extra be paid back before they allow the house to be sold?

    eg someone has a $480k loan on a 500k + 100k houses, they sell the 100k house for 100k but 500k house is now worth only 350k

    Would they always revalue the remaining house or if they received all sale proceeds allow the sale to go ahead?
    What happens if you cant get the extra 50-100k? They wont allow the sale or you have some left over debt?

    What happens if you have a house with a loan for more than its worth and you want to sell it and dont have any other cash?

    cheers
     
  4. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    It's up to the lender - it's possible that they won't release the security, however they may also negotiate a new unsecured loan to be paid back. I know the former is possible, but my experience has been more that there's been a residual loan to pay back.

    Others may be able to shed more light on this, its not a situation I come across very often.
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The lender will require adequate security for their loan so they will not release a property held as security unless the remaining loan is paid down, or other security is provided.

    I have seen contracts exchanged on sales and the vendor unable to complete the sale because the bank refused to release the property. Sale then falls through.
     
  6. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    look to a valuer shop and refi the retained property if u can get a better val than the existing .

    Cross coll is always fine, until it isnt : (

    ta
    rolf
     
  7. smallbuyer

    smallbuyer Well-Known Member

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    Crossing is really dangerous in several ways from what people are saying. Imagine you brought 2 houses at the peak of the boom in somewhere like Moranbah or some other place where prices have fallen 80% and had them crossed.
    Even if you wanted to get before it fell to far you couldnt, selling one for say only 40% less than you paid, the bank wouldn't let you settle unless you could raise hundreds of thousands in cash or somehow sell both at once and get simultaneous settlement.
    What a nightmare position to be in, pretty stupid for the banks as well if they didnt allow the sale and now the properties have lost another 40% of their value and the person goes bankrupt with loans 4x greater than the value of the houses.

    Moral of the story, dont cross anything!!!
     
    Jess Peletier likes this.
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    And the other aspect is retirement plans stuffed up. Here are 2 more case studies:

    Here are 2 real life examples of banks dictating your retirement when crossing.

    Case Study 1.
    Elderly woman owning about 4 properties, living on rents not qualifying for the pension. Slowly loans reverted to PI from IO after the initial 5 year term. She asked the bank to renew the IO term, but they refused saying she had no job so they wanted the debt paid down to reduce their risk. Cash crunch kicking in she decided she had to sell just 1 property to release some cash to use to live on, supplemented by the rents.

    Guess what the bank said? When you sell we will only release the mortgage if you use the proceeds to pay down the remaining loans on the other 3 properties. So now she had only 2 choices - 1 get a job, or 2 sell a second property, or maybe a 3rd and end up with just 1 property fully paid off - no leverage.

    Case Study 2
    younger guy had a large portfolio of property, all slightly negative geared but he had retired with the plan of selling one property every few years and living off the proceeds until the rents increased enough so he could live on the rents solely. he had quit his job and was happily in retirement until the bank said the same thing as case study 1. Not working we will therefore use the proceeds to pay down the loans. That can ruin your retirement.
     
    albanga likes this.
  9. albanga

    albanga Well-Known Member

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    I think soon enough the forum will block the word "cross collateralisation" for being rude.

    I reckon most brokers on these forums do not even cross their T's, just dot the I's.
     
  10. smallbuyer

    smallbuyer Well-Known Member

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    In Terry's examples even if you where working now with the changes to servicing you may no longer qualify and still be in the same boat as his case studies, potentially even if you income has increased since you got the loans!
    How many banks ask for financials when you release a property though? I thought most didn't unless you want increase the lvr against the remaining properties.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes definitely that is why it is best to avoid the problem in the beggining as if you cross you may not be able to uncross, even if you are working.

    The uncrossing would usually be just a substitution of security and servicing shouldn't come into it (usually).