Addressing cross collateralised loans on underperforming assets
Grant and Heidi are a mature couple who own several properties and want to take advantage of their current earnings and repayment capacity to continue growing their property portfolio. A further challenge for them is that two of their existing properties are underperforming, and the total debt across all assets is cross-collateralised.
Reviewed current loan debt across all assets
Assisted with looking at options for portfolio rebalance
Presented loan options to fit the needs of additional investment
Our Proposal
As their total debt across assets is cross-collateralized, Grant and Heidi face reduced flexibility in managing the eventual sale of their individual properties. Intuitive Finance calculated that the best way forward would be to release all available equity in the existing assets (up to 80%), via two means of refinancing and un-crossing the assets and then selling the underperforming assets and enabling further asset purchases.
This meant creating stand alone mortgages using a range of lenders, increasing debt levels to an 80% LVR, and in turn establishing a line of credit. This line of credit was to be used as both a deposit on additional property purchases as well as providing a financial buffer to ensure that repayment schedules can be maintained without any reduction in disposable income. This also meant rebalancing the portfolio by selling the two underperforming assets, and commencing the search for a new property in a more robust area that would allow for capital growth and rent revenue.
The Outcome
Grant and Heidi were able to refinance the underperforming assets using the equity in the properties to establish a line credit to be used to purchase additional property prior to their retirement.
