Buying property almost means learning a new language even if you have purchased property before. You’re likely reading this because you’re ready to buy another property. ‘cross-collateralisation’, ‘cross collateral’ or ‘cross securitisation’ is a term that has been mentioned to you but what does it mean? And should you agree to a cross-collateralised loan.
Definition of cross-collateralised loan
A cross-collateralised loan is where one loan uses multiple properties as security for the loan. Often the mortgage is cross-collateralised against multiple properties to provide additional security to compel the lender to agree to the loan and reduce the LVR.
You’ll want to know that cross-collateralisation isn’t always the best way to borrow. There are certain situations when it is a useful tool but more often than not it is not in your best interests are the borrower (it benefits your lender greatly though!).