Posted on: 08th Nov, 2006 01:42 pm
what does cross collateralization mean?
This term is used when you use your existing house as collateral for a loan for a different property while there is an existing loan on the first house.
An example would like when you have a house and want to purchase another house, if there is enough equity in the existing house then that equity can be used as collateral for a loan towards the purchase of the new house.
An example would like when you have a house and want to purchase another house, if there is enough equity in the existing house then that equity can be used as collateral for a loan towards the purchase of the new house.
Hi Ken,
If the previous house can be used as collateral for a loan for the new house purchase also depends on the LTV. If the appraised value of your existing house is about $600,000 having a mortgage of $150,000, then it will have a LTV of 25%.
What that means is that you have borrowed up to 25% of your property's value. You would be able to use the balance value of your property as collateral for taking another loan.
I have seen many lenders agreeing to loan up to eighty percent LTV or higher also.
Atkinson
If the previous house can be used as collateral for a loan for the new house purchase also depends on the LTV. If the appraised value of your existing house is about $600,000 having a mortgage of $150,000, then it will have a LTV of 25%.
What that means is that you have borrowed up to 25% of your property's value. You would be able to use the balance value of your property as collateral for taking another loan.
I have seen many lenders agreeing to loan up to eighty percent LTV or higher also.
Atkinson
It also depends on whether you are going to purchase the other home in the same state or not, as many lenders may not agree to use the collateral in some different state having different jurisdiction.
Hi Ken,
Cross collateralization occurs when the collateral for a loan is used as the collateral for another loan. For instance, you have a home which acts as the collateral for an existing mortgage. Now, if you use the equity in the same house as the collateral and take another loan to buy a new house, then it is known as cross-collateralization.
Thanks,
Sara
Cross collateralization occurs when the collateral for a loan is used as the collateral for another loan. For instance, you have a home which acts as the collateral for an existing mortgage. Now, if you use the equity in the same house as the collateral and take another loan to buy a new house, then it is known as cross-collateralization.
Thanks,
Sara