We apologize, but the forums are closed for new posts. Click Here To Join The Unemployables Facebook Group

Welcome, Guest. Please login or register.
September 25, 2021, 10:29:59 pm
Home Help Search Calendar Login Register

Welcome, Guest. Please login or register.
September 25, 2021, 10:29:59 pm
Home Help Search Calendar Login Register

Author Topic: cross capitalization  (Read 2828 times)

Offline gpre

  • Member
  • ***
  • Posts: 112
cross capitalization
« on: May 29, 2007, 11:53:48 am »
I've read about a technique called "cross capitalization" or "cross-collateralization",but don't fully understand how this works.  Can someone explain this process?  Is it like a piggy back loan (that you make monthly payments on)?

Offline doston

  • Member
  • *
  • Posts: 33
    • Commercial Loans Made Easy
Re: cross capitalization
« Reply #1 on: May 30, 2007, 12:07:41 pm »
Cross collaterization is where is typically where a lender will use one piece of collateral for multiple loans that you have with them. For example, your lender decides to use your property as collateral for a car loan or credit card that you have with them and initiates foreclosure on the property because of your default on the credit card. I'm not sure if cross capitalization is the same thing.
100% Financing Secrets Finally Revealed
These methods work in the real world.
Click Here for the Free Report

Offline gpre

  • Member
  • ***
  • Posts: 112
Re: cross capitalization
« Reply #2 on: May 30, 2007, 02:57:28 pm »
Doston, thanks for the reply.  Let's say that I own a property with $100k in equity and I want to purchase 2 more properties each worth$100k.  If I can 100% cross collaterize the first purchase against the equity I already have, can I cross collaterize the second purchase against the first purchase in which I have no equity yet? 

Offline REI4ROI

  • Member
  • ****
  • Posts: 803
Re: cross capitalization
« Reply #3 on: May 30, 2007, 05:26:13 pm »
To answer your question, no---you can't leverage off leverage you don't own or have rights to...

Regards,

Scott Miller

P.S.  You won't be able to 100% cross collateralize either...
P.P.S.  The other posters reference of cross collateralization is called a bridge loan---it when you use the equity in another property to securitize a position in another piece of property or multi-properties.

Doston, thanks for the reply.  Let's say that I own a property with $100k in equity and I want to purchase 2 more properties each worth$100k.  If I can 100% cross collaterize the first purchase against the equity I already have, can I cross collaterize the second purchase against the first purchase in which I have no equity yet? 
RE Investment Advisor
Weichert Realtors
[email protected]

Offline PaulBroni

  • Member
  • ****
  • Posts: 571
    • PaulPaysCash.com
Re: cross capitalization
« Reply #4 on: May 30, 2007, 09:49:06 pm »
I've never heard of cross capitalization.

Cross collateralization has been more or less described already. It's basically pledging an asset as collateral for a loan when the loan is being used to support an altogether different asset.

You can not usually use 100% of your equity as collateral, however.

Let's say that the lender has a max LTV of 80%. You want to buy a property costing $100K, so you can borrow $80K. That leaves a $20K gap. You'd like to find a way to borrow the money.

Let's also say that you own a $100K property with debt of only $60K. If the lender is comfortable with an LTV of 80%, that means you can still leverage that property an additional $20K, which coincidentally is the amount of money you need to buy the first property.

Your lender could cross-collateralize the new loan--for the full $100K--by taking a lien on both the new and the existing properties. You're basically tapping the equity on the existing property to help finance the new property.
"To have something you have never had, you must do something you have never done."
"In the beginning, the limited partners have all the capital, and the general partners have all the experience. Towards the end, their roles are reversed."
"Where are the customers' yachts?"

Offline doston

  • Member
  • *
  • Posts: 33
    • Commercial Loans Made Easy
Re: cross capitalization
« Reply #5 on: May 31, 2007, 12:46:44 pm »
What you're describing sounds like substitution on collateral; I'm not sure that is the same thing as cross collateralization - it probably is. As stated in the previous posts, you can't use equity that you don't have as collateral for another loan.
100% Financing Secrets Finally Revealed
These methods work in the real world.
Click Here for the Free Report

 




SMF 2.0.15 | SMF © 2017, Simple Machines