Cross-Collateralisation: What It Is and Why It Can Be Risky
Christian Stevens, Mortgage Broker
Published January 31, 2025, 2:10 p.m ET
Cross-collateralisation is a lending setup where a single lender uses two or more of your properties as security for one or multiple loans. While it can seem convenient, it often creates hidden risks and reduces flexibility for property investors.
Here’s what you need to know before agreeing to cross-collateralise — and when to avoid it.
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🔑 Key Facts
- Cross-collateralisation is when two or more properties are tied to one loan — or used as joint security across multiple loans.
- It can simplify approval but creates risk: if you want to sell one property, the lender has control over both.
- Uncrossing properties later can be costly and complex.
- Flint helps you avoid unnecessary cross-collateralisation — and restructure it if you're already locked in.
What Is Cross-Collateralisation?
Cross-collateralisation (also known as cross-securitisation) means that more than one property is tied to a single loan or a group of loans.
For example:
- You own Property A and want to buy Property B.
- Instead of releasing equity via a separate loan, your lender ties both Property A and Property B to one loan.
If you sell either property, the lender has the right to reassess or restrict the remaining loan balance — because both assets are tied together.
Why Lenders Recommend It
Lenders often push cross-collateralisation because it:
- Makes loan processing simpler (from their side)
- Gives them more security over your assets
- Reduces the chance of you moving to another lender easily
But what benefits the lender doesn’t always benefit you.
Risks of Cross-Collateralisation
- Less flexibility to sell or refinance: You may need lender approval to sell one property, even if its loan is paid off.
- Revaluations on multiple properties: A poor valuation on one asset can impact loans across the group.
- Complicates portfolio growth: You may hit borrowing or policy limits faster because all your properties are intertwined.
- One lender, more risk: If your situation changes, you can’t easily move part of your portfolio elsewhere.
Preferred Alternative: Standalone (Split) Loans
Instead of tying multiple properties together, savvy investors structure loans so that each property has its own separate facility.
Benefits of standalone lending:
- Sell or refinance one property without affecting others
- Easier to switch lenders or negotiate better rates
- More control over each investment’s performance
- Less risk of domino effects from low valuations or policy changes
When Cross-Collateralisation Might Be Considered
There are a few exceptions where cross-collateralisation might be considered, such as:
- Short-term bridging finance
- Complex commercial or development deals
- Lender policy restrictions (e.g. tight serviceability or unusual security types)
But in most residential and investment lending cases, it’s best avoided.
📞 Want to Structure Your Loans for Long-Term Portfolio Control?
At Flint, we help investors:
- Avoid cross-collateralisation traps
- Set up clean, flexible loan structures
- Refinance out of complex setups for more control
Talk to Flint today and let’s future-proof your lending strategy — one smart loan structure at a time.
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