The All Monies Mortgage Clause Explained

by | May 22, 2020

Did you know that:

The money in your bank account used for direct debits.

All money in your offset or redraw accounts.

Any funds due to you at settlement.

Any payments made in advance.

 

The bank can potentially keep it under the “All Monies Mortgage Clause”.

Yes, that’s right… all of it.

 

An “all monies clause” lets your lender use your home as security against any other debts you may have with that lender. For example, you have a mortgage with a lender. You then apply for a credit card with that same lender. If you then default on that credit card, your home could technically be at risk because that mortgage extends over to all debts you have with the lender/bank.

It’s quite common when you start out as a Property Investor to use the same bank you used for your home loan (PPR), for your property investment loans.

You know them, they know you – they have your savings, you use their credit cards, it’s all one log-in and easy to transfer money between accounts.

 

Sounds OK right? WRONG.

 

If you set up your lending like this you may encounter the All Monies Mortgage Clause.  What this means is that all your money with the bank can be used to cover any shortfalls on any lending valuation you have with the bank.

So how do they do this?

They do it by what is commonly known as “cross-securitisation or cross-collateralization.”

 

What does this mean for you?

It means the bank will use equity in the higher valued property, often your own home, as the security to buy your next property. Sounds good doesn’t it as you don’t have to come up with as much money for a deposit.

 

BUT…. Here’s what you need to know,

 

Using this strategy, eventually, you get to a point where the bank will stop lending you money.

In extreme cases, like right now, when you sell one of your properties, the All Monies Clause lets your bank take proceeds of that sale and apply it to your other loans. They do this to decrease their liability so the bank has less financial risk by decreasing their exposure.

 

The lesson?

Know how to be safe with your money. Know when, what and how to cross securitize your portfolio safely OR better still, don’t do it at all.

The way you structure your finance and seeking professional help can put you in a position that you’re not at the mercy of the banks. The All Monies Mortgage Clause is just one of many things to watch out for when applying for a loan.

 

 

Click here to like us on Facebook and see more updates like this.

Hey there, do you enjoy the Positive Real Estate Blog? If you did, why don’t you book into a Property Information Night in your area and get more information from our team. You can do so here.

Take the Next Step

A Lending Boom Is Coming Are You Ready?

A Lending Boom Is Coming Are You Ready?

After a lot of bad news over the past 12 months – thanks a lot COVID-19 – it’s nice to be able to kick off 2021 with some good news. There’s going to be a lending boom which, if you have your property investment strategy in place, is going to make your life a whole lot easier so you can build your property portfolio faster and cheaper.

What Is the True Value of Your Investment Property?

What Is the True Value of Your Investment Property?

Like a fine wine, the value of property gets better over time. Traditionally, the more time you have an investment property, the higher the value will rise.
However, unlike your favourite Shiraz, property values can go up and down, and up again.
Getting to know how, why and who is valuing your property can help us understand what property to invest in.
There are three ways to value a property – and three very different people doing the valuing.

The 3 ‘Big Rocks’ of Property Investment Success

The 3 ‘Big Rocks’ of Property Investment Success

What are your Big Rocks this year? What are your Big Rocks for your property investing journey?
If you’re scratching your head and wondering if you’ve accidentally stumbled across a blog for construction workers, bear with me.
Big Rocks is a concept often used in business or life coaching to essentially describe your priorities. The theory is, if you don’t have clear priorities, or if you have too many, chances are you’ll let smaller issues distract you and ultimately fail in your goals.

Property Hot Spots: How To Predict the Best Places To Buy

Property Hot Spots: How To Predict the Best Places To Buy

Historically real estate has always been a good place to put your cash. It’s an asset you can feel and touch – unlike stocks or shares – which makes investors feel safe. And, in the right place and time, property can grow in value while you sleep, meaning as an investor you don’t have to do much to increase your personal wealth. But as investors, how can we better predict the next hot spots for real estate investment so we can get in at the right price? How do we know the best places to buy that are guaranteed to grow in capital value, return regular rent increases and ensure future personal wealth?

How NOT To Be One of the 99% of Investors Who Fail in Property

How NOT To Be One of the 99% of Investors Who Fail in Property

According to the Australian Bureau of Statistics, 99 per cent of property investors in Australia fail. In this instance, the definition of failure is failing to buy three or more properties. Failure is easy. It takes very little effort to be bad at something. Success is something you have to work for, something that takes time and effort. But if you’re willing to put in the hard yards, we know you can succeed. We know because we’ve helped thousands of Australians buy property that’s yielded millions of dollars of income. To understand how to succeed, we need to know why so many fail. People fail because …

Summary
The All Monies Mortgage Clause
Article Name
The All Monies Mortgage Clause
Description
An "All Monies Mortgage Clause" lets your lender use your home as security against any other debts you may have with that lender.
Author
Publisher Name
Positive Real Estate
Publisher Logo