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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).