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What is the alternative to Cross Securitisation or
Cross Collateralisation?
The alternative is to structure each loan so it lists only one property
as security.
You can have several loans
secured by one property just ensure that no loan list more than one property as
security.
Here are some examples of the
improved options that come from not having your loans cross securitised.
1. If you sell one of the properties you decide how the proceeds are used
· Your only need to repay any loans
that list that property as security.
· You decide what do with any
surplus funds
· No other loans are impacted or
need to be re-done.
2. If you fall behind on your loan payments your lender only has one
property to sell.
· Your lender can only sell the
security property listed on the loan.
· This means that if you are up to
date on your home loan but behind on the investment property loan your lender
can only access the investment property loan.
3. It is less complicated to access equity available in a property.
· To top up your loan and release
equity you will only need to organise (and pay for) a valuation for the single
property that is security for the loan.
· If one property has gone up in
value you can organise a valuation for that one property in isolation and increase
the loan by the amount of available equity.
4. Refinancing some of your debt to another lender will be much easier
·
You just
need to identify your new lender get a valuation and do an application. Once approved your new lender will pay out
the loan with your old lender and take security over the property.
Ensuring your loans are not cross securitised will
give you much greater flexibility for whatever life decides to throw at you or
whatever you choose to pursue yourself (even if you do not know what that will
be yet).