Page 31 - Smart Money
P. 31
Smart Money
the structure that suits them and delivers them more money, not what
suits the client. This is not ethical or legal under current legislation.
Your mortgage broker should be someone who has had at least a couple
of years’ experience in lending, though not necessarily in mortgages.
They should have empathy. They should also have their Certificate
IV in Finance & Mortgage Broking, as well as a Diploma of Finance &
Mortgage Broking Management. Not all mortgage brokers have achieved
the Diploma qualification. You want someone who has completed the
appropriate training and education, and someone who comes highly
recommended by a friend who has already tested them. That is generally
what happens for us – we are often referred by our previous clients.
Missed opportunities
An example of this kind of bad advice is taking on an interest only loan for
five years because you think you can’t afford it. Five years later you find
you haven’t actually paid anything off your loan and potentially not built
any equity. That means you can’t use that equity to buy another house or
an investment property.
Cross-securitisation is where the bank uses one property to enable you
to buy a second property. For example, let’s say you have 30% equity in
your owner occupier property, and you use the equity in that property
to buy an investment property. You don’t need to have a cash deposit to
be able to purchase the second property; you just use the equity from the
first. But what it means is that, for everything that happens to Property
B, Property A must be used as well. If you are going to sell Property A
to purchase another property, there still has to be enough equity in it to
cover the debt on Property B.
Cross-securitisation means that both properties are locked in together.
You might think that if you sell Property A you will be able to take
$100,000 in cash from the sale. What you might not realise is that the
bank might take that $100,000, or part of that $100,000, to reduce the
debt on Property B to a more acceptable level.
