Cross-collateralisation
Using more than one property as security for a loan, so the properties are tied together with the same lender.
- Two or more properties secure one or more loans
- Can make selling or refinancing harder
- Usually avoidable with standalone loans
How it works
Instead of each loan being secured by one property, the lender holds several properties as combined security. This can seem convenient when using equity.
Why investors avoid it
If you sell one property, the lender can revalue the others and decide how much of the sale proceeds to keep. Standalone loans, with equity released separately, give more control.
Ask your broker how each loan is secured before you sign. Untangling cross-collateralised loans later can be slow and costly.
Common questions
Is cross-collateralisation always bad?
Not always, but it reduces flexibility for portfolio builders.
How do I avoid it?
Use separate loans secured by individual properties, and release equity as its own loan.
Related terms
Sources
General information only. It does not consider your objectives, financial situation or needs, and is not financial, credit, tax or legal advice. Rules change, so check current law and get advice from a licensed professional before acting.