What is a cross charged mortgage

[Paul O Mahoney]

I have tried to find what this is but can't find anything that gives clarity.

If it's ok to ask here I'd be appreciative of any answers.

Paul

 

[Gordon Gekko]

Hi Paul,

It’s just a mortgage where there’s also security on another property.

Gordon

 

[Gordon Gekko]

Say I’ve two properties, my home and another house.

It’s possible to have a mortgage on the other house that’s secured against both properties.

Or you could have two mortgages, one on each property, but secured against both properties.

 

[Paul O Mahoney]

Say I’ve two properties, my home and another house.

It’s possible to have a mortgage on the other house that’s secured against both properties.

Or you could have two mortgages, one on each property, but secured against both properties.

Thanks Gordon for that .

So, its possible to have two contracts and they would be secured upon eachother
?

 

[Gordon Gekko]

Thanks Gordon for that .

So, its possible to have two contracts and they would be secured upon eachother
?

Moreso you could have two mortgages used to buy two properties where each mortgage is secured against both properties.

 

[Dave Vanian]

A practical implication of a cross charge is that if you default on the mortgage, the lender can repossess and sell either or both properties to clear their loan.

 

[bipped]

I know someone who had to do that cross-security for the bank, but it wasn't explained clearly to them and they didn't do the research themselves. When they sold one of the properties, they had to pay off the mortgage of the sold house as normal, but IIRC they had to pay down on the other property too. They had CGT to pay also.

That might be an unusual arrangement but my friend got a big shock at the time.

 

[Paul O Mahoney]

I know someone who had to do that cross-security for the bank, but it wasn't explained clearly to them and they didn't do the research themselves. When they sold one of the properties, they had to pay off the mortgage of the sold house as normal, but IIRC they had to pay down on the other property too. They had CGT to pay also.

That might be an unusual arrangement but my friend got a big shock at the time.

This is my fear, our 2 rental properties are cross charged, and I understand why the bank did that, but now we are totally fed up with the rental market we want out. One will probably just about wipe its face so that will have to go first.......the other will have a capital gain and as you said CGT will have to be paid .

 

[NoRegretsCoyote]

One will probably just about wipe its face so that will have to go first.......the other will have a capital gain and as you said CGT will have to be paid .

Have you talked to the bank? They may be open to re-structuring after sale of one property (not if you are on tracker rates though).

 

[Paul O Mahoney]

Have you talked to the bank? They may be open to re-structuring after sale of one property (not if you are on tracker rates though).

Tracker.....and the one we'll hang to will not be a tracker.....long term tenants in that too, so notice to quit will be close to a year, unless they buy it off me .........

 

[Mamamia22]

I have a retired relative in a similiar situation.
Approximate figures. PPR worth 700k+, mortgage nearly paid off.
Rental A worth 400k. 200k outstanding on interest only.
Rental B worth 400k, 200k outstanding on interest only.
Rental C worth 375k, 200k outstanding on interest only.
Rental D worth 400K, mortgage outstanding mortgage 590k (bought in 2006, pre 2008 crash, a bad decision).
Rentals A, B and C have two years to run.
Rental D has a longer term around 4 years.
Plan is to sell the PPR. Issue notice to a tenant. Move into either A, B or C, pay off all three mortgages with PPR. Avoid CGT. Keep 2 rentals. But the problem down the road is D. I assume getting deeds on A, B and C will be doable ? But perhaps not ? What is lender likely to request on redemptions of A, B and C?

 

[huskerdu]

Can you explain a few things please ?

When you say “2 years to run “ do you mean the interest only ?
How much were A, B, C bought for ? You say that selling will avoid CGT , why do you think that there will be no CGT .

What do you mean by “is getting the deeds doable ?” Do you mean , will they be able to sell , given the outstanding capital on D? Is there a cross charge ?

 

[Mamamia22]

Yes I meant 2 years left on the mortgages which are interest only hence capital due back to lender at the end of term. He doesn’t plan on selling the rentals to avoid CGT. The problem is the final property which is in significant negative equity. He is thinking of selling his PPR to get the money to repay the mortgages. Yes there is a cross charge. He wants to own the three rentals for the remainder of his retirement.