What it is
Cross-collateralisation happens when a lender takes more than one property as security for a loan, often when equity from your home is used for the deposit on an investment. It is simple at the time, which is why many banks set it up by default.
Why it becomes a problem
When you sell one property, the lender can decide how much of the proceeds to keep, revalue everything, and even ask you to pay down other loans. A fall in one property’s value can affect your whole position, and moving to a better lender means refinancing every property at once.
The stand-alone alternative
The cleaner approach is to release equity through a separate split on your home loan, then use that cash as the deposit on a stand-alone investment loan. Each property is secured only against its own loan.
How to undo it
We start with fresh valuations, then refinance properties individually, often to different lenders, so each loan has its own security. It takes planning, but it restores flexibility for the next purchase.
General information only. It does not consider your objectives, financial situation or needs. Speak with a licensed adviser and your accountant before acting. See our Disclaimer.
