Cross-Collateralise

Cross-collateralisation is when two or more of your properties are used as security for a single loan, or when multiple loans are bundled together under one lender using multiple properties as security. It sounds complex, but it's actually a fairly common structure - especially for property investors.

Here's a simple example. Say you own a property worth $800,000 with $400,000 owing, and you want to buy a second investment property. Rather than setting up two separate, independent loans, a lender might cross-collateralise both properties - meaning both are tied together as security for the total debt.

On the surface this can seem convenient. It often allows you to access equity without needing a cash deposit and can simplify the borrowing process in the short term.

However there are things worth considering and understanding beforehand. Namely, your property will be tied up and if you would like to sell one of them, you’ll need to ensure there’s enough equity remaining to do so.