Investment Loan Structure —
Avoiding Cross-Collateralisation
Why standalone loan structures are usually better for investors and how to avoid cross-collateralisation.
What is cross-collateralisation? Cross-collateralisation means using multiple properties as security for the same loan or group of loans. While it can simplify the borrowing process, it creates risks: the lender has control over all your properties, making it harder to sell one independently or refinance individual loans. Most experienced investors and brokers prefer standalone structures.
Why standalone structures are usually better
With a standalone structure, each property has its own separate loan with its own security. Your home loan is secured only against your home. Your investment loan is secured only against the investment property. This separation means you can sell either property without needing the lender's permission to restructure the other loan. You can refinance one loan without affecting the other. If one property falls in value, it does not affect the other loan.
When cross-collateralisation happens
Cross-collateralisation typically occurs when you borrow from the same lender for both your home and investment, and the lender bundles the securities together. Some lenders do this by default. Others will offer standalone structures if you ask. A broker can ensure your loans are structured independently from the start, avoiding complications down the track.
Read our full guide to investment property loans for more on structuring your portfolio.
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