Rise High Investor Weekly Video #50 – Cross Collateralisation

Understanding Cross Collateralization for Property Investors

Cross collateralization happens when a single loan is secured by more than one property. While banks love this arrangement because it ties you to them and gives them extra security, it’s not ideal for you as the investor. Here’s why:

• Reduced Flexibility: You’ll have less control over your loans and properties.
• Harder to Sell: Selling a property becomes more complicated, as the bank will often require valuations of all your other properties before granting consent.
• Slower Processes: The additional requirements can significantly slow down the sale or refinancing process.

How to Avoid Cross Collateralization

The good news is, you can still access equity from one property to fund the deposit for another property without cross collateralizing. Here’s how:

• Keep Loans Separate: Create one loan secured by the equity in your existing property for the deposit, and another loan secured by the new property for the remaining purchase amount.
• Ensure Tax Deductibility: Both loans will typically be tax deductible against the new property, as it’s the purpose of the loan, not the security, that determines deductibility.

By keeping your loans separate, you retain control and flexibility, making it easier to manage your portfolio over time.

Why Work with a Property Investment Advisor?

Navigating loan structures can be tricky, which is why I strongly recommend working with a knowledgeable property investment advisor. They can:

• Help you avoid cross collateralization.
• Tailor your loan structure to suit your needs, not the bank’s.
• Maximize your flexibility and ensure your financial strategy aligns with your long-term goals.

Take Charge of Your Investments

Understanding and avoiding cross collateralization is a simple yet powerful way to keep your property investments on track. By structuring your loans the right way, you’ll have greater control, flexibility, and peace of mind as you build your portfolio.

If you have any questions about loan structures or want to learn more, the Rise High Investor team is here to help. Let’s work together to set you up for success on your property investment journey!