Should you put a cross through cross-collateralisation?

As a property investor, your loan structure is crucial.

If you are dealing directly with one bank, chances are they have you in a 'tight hug' called cross-collateralisation.

Cross-collateralisation is where one or more of your loans is secured by multiple properties.

Your bank probably offered you an 'excellent' deal in exchange for complete control of your property portfolio.

Cross-collateralisation is problematic, as:

• All of the security properties will need to be revalued whenever one of the properties is sold... this can affect how much money is released to you 

• from the sale, particularly if one or more of your properties have dropped in value on paper.
• If you are looking at accessing the equity of your well-performing investment property, but it has been used as security in conjunction with a property that has dropped in value, this may not be possible as your overall loan to value ratio (LVR) may not support increased lending.
  
• Fees and costs associated with reworking loans or moving lenders may be higher.
  
• The bank is in total control of your situation and will dictate what loan amounts and products they are willing to offer you, which may or may not be in line with your investment strategy.

As property investors in our own right, we are passionate about creating effective investment loan structures which will help you reach your goals sooner and more smoothly. Contact us for an obligation free consultation.