A common scenario brokers encounter involves arranging an application where the client holds multiple securities.
For example, this could include refinancing or releasing equity on one property while purchasing another.
Effectively structuring these applications requires a thorough understanding of lender policies and typically follows one of three approaches:
A single deal, where the securities are cross-collateralised.
A single deal, where securities are not cross-collateralised.
Two separate deals, referencing one another in their fact finds
1. A single deal: cross-collateralised
Securities are added in a single deal in Broker Tools > Security Details tab.
Firstly, all existing securities are added to 'Assets' page (and all current associated debt is detailed in 'Liabilities').
If an existing security is being Refinanced, please ensure that the 'Refinance' checkbox is selected next to each mortgage to be refinanced on the Liabilities page.
If an existing security will be used for Equity Release, you only need to load the security as existing.
For a Top-up, similar to a refinance, the property's existing mortgage must be recorded under Liabilities, and the property should be listed as an existing security. Additionally, under the 'Security # - Other Mortgages' section, the 'Loan increase' checkbox must be selected.
If the 'Security Details' tab appears in red but no information seems to be missing within the security details themselves, please return to the 'Assets' page. Then, click the small pen icon next to the property address search field and verify that all address details, such as street type (don't type in, select from drop down), are fully completed.
Next, if your using an existing property for the security (refi, loan increase or equity release), in 'Security Details' tab use 'Add security > Add existing' button, then choose the existing property.
If you will be adding a new security (for purchase) use the 'Add security > Add new' button.
Complete all requirements and other security details then proceed to 'Funding Worksheet'.
Complete all requirements in both 'Finds required' and 'Funds available' sections (leave only the 'proposed loan amount' empty), then, select the 'Cross-collateralised' checkbox.
Lastly, enter the 'Proposed loan amount' and click 'Save and calculate' button.
Full funding position will look like this:
Please note that when more than two properties are cross-collateralised, all properties must be included. The system does not allow cross-collateralisation of only some properties while excluding others.
Cross-collateralised securities often have multiple product splits, to associate loan accounts with the securities. In this case, splits could be:
$50,000 to pay off Owner occupied balance and release equity;
$800,000 loan for the new investment purchase.
This totals to $850,000 for the proposed loan amount.
For the first split, the product is added from the 'Product search' tab.
All additional splits are added in 'Compare products' tab.
2. A single deal: not cross-collateralised
The process will be the same as the cross-collateralised example above, except in the 'Funding Worksheet' the 'Cross-collateralised' checkbox remains unselected.
3. Two separate deals
Most lender require each security to be presented in a separate deal (unless cross-collateralised).
Each deal is then presented as a separate application.
For example:
Deal 1 - refinance and equity release on owner occupied property to release funds to purchase an investment;
Deal 2 - an investment purchase using funds from Deal 1.
Key to this process is to set Deal 1 correctly, then duplicate deal and make assumptions that Deal 1 is approved. I.e. in 'Assets' and 'Liabilities' Deal 1 scenario is presented as a completed deal (higher loan limit and balance for the refinanced property).
In Deal 2, then released funds from Deal 1 are presented in 'Funding Worksheet'.
Advisers often need to present the full funding position to their clients for scenarios where properties aren't cross-collateralised. In these cases, the best option is to use funding position in Quick Tools and show funding position in a single document (and then prepare two separate deals).