Aaron explains cross securitisation: combining two properties' values to borrow more money. The catch is you can lose control of assets, need revaluations to separate them later, and selling one property won't give you clear proceeds.
What is cross securitization? Hey, it's Aaron from Diagnostics and Finance. Cross securitization is when we take one house and we take another house and we add them together as if they were only one house. And the combined value of both allows us to borrow an amount of money underneath it. If you've ever bought a home that you haven't contributed a deposit to, or you feel that the home loan that you have on that property is at the same or equal value of the property, you are probably cross securitised. Some people also think that if you owe a couple of hundred thousand dollars on one property and you owe nearly 100% on other properties, whether it's next door neighbour or across the country, that it may be that when I sell my own property I pay back the couple hundred thousand and then I take the rest of the money and I go buy another house. That's not necessarily the case. What would happen is in a cross securitized environment we'd start breaking these properties apart. As we break these properties apart, then we're going down the line of needing to revalue these properties. And what has happened since you bought the properties is the immediate question that comes to mind. If this one's gone up in value or down in value, it will change the aspects of what you can achieve. So the majority of cases I don't typically don't go down the line of cross securitization due to the fact that you lose control of your assets. There are certain times that it can potentially come in, but it's not necessarily done for the first property that you go out and buy, whether it's an investment or a second owner occupied property. When you go out to buy a second property, it's not the first strategy I go after. I'll talk about different strategies in subsequent videos, but just want to let you know what cross securitization is. Alright, bye for now.
