Cross Collateralisation: When It Works, and When It Doesn’t
What is cross collateralisation? It can seem simple, but it can trap investors. Imperium Finance explains the risks and the smarter, stand-alone alternative.
For investors with multiple properties, deciding whether to “cross” securities or keep them stand-alone is one of the most important structural decisions you can make. While crossing can seem efficient, it also comes with hidden risks that can limit flexibility later.
What Is Cross Collateralisation?
Cross collateralisation (or “cross securitisation”) means that two or more properties are used as security for one or more combined loan facilities. In other words, the lender has a claim over multiple assets, not just one.
At first glance, this can look like a streamlined solution. One lender, fewer accounts, and a consolidated loan balance. However, that simplicity can sometimes come at a cost.
When Cross Collateralisation Can Work
For high-income earners and established investors, crossing securities can be useful in specific situations:
Portfolio leverage: You can access a higher combined equity position, which may increase overall borrowing power.
Portfolio optimisation: It can allow easier movement of funds between properties when liquidity and servicing are strong.
Simplified administration: Some clients prefer one lender and a single point of contact for multiple properties.
In cases where debt-to-income (DTI) ratios are low and servicing is not a concern, crossing can offer efficiency and access to premium rates or policies reserved for higher-value portfolios.
When It Becomes Problematic
For most investors, especially those still building their portfolio, cross collateralisation can create significant restrictions:
Reduced flexibility: Selling or refinancing one property becomes complex, as all securities must be reassessed.
Valuation limitations: Some lenders will ‘pool’ securities and utilise Automated Valuation Models (AVMs) rather than individual property assessments. This can underestimate the true value of your portfolio.
Servicing pressure: When servicing buffers or DTI caps tighten, shifting part of your portfolio to another lender can be difficult or expensive.
These factors can leave borrowers effectively 'stuck' with a lender, unable to restructure or refinance individual loans when opportunities arise.
The Smarter Alternative for New or Growing Investors
For clients who are still building their portfolio, or who prefer more control, separating loans and securities is often a better strategy.
Each property is assessed and valued individually.
Your Primary Place of Residence (PPR) is kept separate.
Equity can be accessed selectively, without triggering full portfolio reviews.
You can work with multiple lenders, choosing those with stronger policies for servicing, negative gearing or higher allowable DTIs.
Working with a broker who can order short-form or upfront valuations makes it easier to confirm available equity and identify where opportunities exist without unnecessary cost or risk.
Final Thoughts: Structure is Everything
Cross collateralisation can be effective for certain high-net-worth clients with strong servicing and liquidity. However, for most investors, a stand-alone loan structure provides greater flexibility, transparency, and control.
Your lending structure should evolve with your portfolio and your goals. Whether you are expanding, consolidating, or restructuring, it's smart to ensure each loan supports the bigger picture rather than limiting it.
As specialists in investment loan structuring, we can review your existing portfolio or design a flexible, strategic structure for your next purchase. Contact us today for a portfolio review.