Hiya
Im no finance guru, but will strongly suggest (and at the risk of repeating myself myself
that whenever a banker suggest that something isnt a problem in regard of equity contribution, that one takes this with a grain of salt, just as one would taking advice from the ATO on minimising your taxes.
Just seven reasons faced by my clients with cross coll have been :
1. Bank holds all your equity. Says no more money, youre at your maximum service level. Release of property may take many weeks to months or at an extreme the lender forces you to take ALL the loans to another lender.
2. Bank holds all your equity and you have fixed loans. Bank Says no more money, youre at your maximum service level. Release of property may cost squillions because you need to break one or more fixed rate loans.
3. Bank holds all your equity. Says no more money, youre at your maximum service level. Loans once were all at 90 % of lvr, now at 75 %. You want to revalue to 90 % and only pay lmi on the new money. Sorry borrower, please go to another lender and pay new mortgage insurance
4. Bank holds all your equity. LMI says no more money, youre at your maximum exposure level. Sorry borrower, please go to another lender and pay new mortgage insurance
5. Bank holds all your equity. Bank says your estimate of valuations are rubbish, we arent going to give you any more money. Sorry borrower, outcomes as per 1 to 4 above.
6. Bank holds all your equity. Mr and Mrs decide to split assets after divorce. 1.3 mill fixed rate loan crossed over several properties. 63 000 break cost to split it all up and sell some off
7. Bank holds all your equity. You run into financial difficulty, BUT you have lots of equity. You try and move one of your properties to a fast settling no doc lender to release funds and get you of trouble. Bank wont release security, they smell a rat, slow the release of the property, and within 60 days you will have a judgement against you and the sheriff at the door.
Now, lets weigh this against the benefits of xcoll .
1. Maybe reduced fees, UNLESS you do a fair few revals in which case your entire portfolio needs to be revalued every time.
2. Xcoll allows you to pool little bits of equity. Most loans will allow top ups of as little as 10 k
3. Sometimes its the only way the lender will do the deal, and in that case xcoll is better than no loan.
Dunno bout you, but in MOST cases xcoll doesnt present a good argument.
ta
rolf