Cross Collateralisation is now more of a problem than ever

Cross Collateralisation – many say avoid it like the plague – others say it’s not a problem.

In this Real Estate Talk show I spoke with our finance expert Andrew Mirams, from Intuitive Finance, who says now more than ever, with all the tightening of the rules by APRA, it’s more important that you consider whether or not you should have all of your properties cross-collateralized. 


Kevin: Andrew, you’re expressing some concern about cross-collateralized loans.

Andrew:  Yes Kevin, we’re seeing the constant and ongoing debate about cross-collateralization.

Whereas you have some people advocating it’s okay, we’re certainly an advocate of not doing pig race

At the moment, with the tightening of the rules, we’ve had a couple of people contact us – who weren’t original clients – saying, “I’ve got all my loans linked, and my properties are linked at one lender. What can you do for us?”

We’re just finding with tightening of bank’s lending standards tighten there’s certainly a case for not having all your eggs in one basket is not the best thing for us.

People need to be aware, and if they are in that position, they need to start looking at taking some action.

Kevin:  What can they do if they are in that situation, Andrew?

Andrew:  The first thing now more than ever, when the rules are tightening and thing are getting harder to get loan, is to seek professional advice.

Find someone who can help to review your portfolio and see what you’ve loan structure you’ve got in place.

Then see if there are lenders  out there that will give access to funds, and then try and unwind your current loan structures.

This doesn’t necessarily mean throwing the baby out with the bath water.

You can still retain your relationship with your lender.

It may just mean a restructure of your current facilities.

loan value ratio percent property bank lend moneyThe problem is that when interest rates are low and times are good, people tend to become very complacent.

People don’t seek advice and review their loan structures  – it’s been a thing that people haven’t addressed in the good times we’ve recently had, but hopefully that won’t leave people short if we’re about to experience tougher times with our lenders and  the regulations APRA are wanting to enforce.

Kevin:  I guess this is a time to be proactive as opposed to reactive – in other words, not waiting for the banks to come to you, but get on the front foot and do something about it now?

Andrew:  No doubt. Absolutely.

As with anything, you would much rather be in the driver’s seat than being towed around.

I think the more proactive and the sooner you address some of the things if there are some potential issues, the better.

Kevin:  How can people make themselves more attractive to the banks.

Andrew:  The golden rule there was make sure you don’t cross-collateralize or have your loans linked.

Then make sure you have more than one lender.

If you’re a portfolio investor, or you’re starting to grow your portfolio, you don’t really want all your loans to be with one bank.

It doesn’t even matter if you have all your loans not cross collateralised – having all your lending at one bank means that they still have the power.

In times when it’s a little bit tougher to get access to funds, being an existing customer is a little bit easier than being a new customer.

Also make sure you have your right debt structures in place.

What I mean by that is actually using your equity, making sure – if you’re an investor – you have a line of credit and a buffer set up, so that if things do get a bit tougher and your tenant moves out, you’re not actually having to fund it from your own income, that there are actual structures in place to help you and see you through.

The final thing is in low interest rates and when things are going well, we still get access to personal debt, credit cards, and personal loans, and in times when you’re looking to access funds, if the credit rules are a little bit tougher, now’s the time to look at eliminating those or certainly reducing them.

Kevin:  Thanks for your timely warning as well. Andrew Mirams from Intuitive Finance who you can see as a regular contributor on, of course, or through his website,

Listen to the full show at and while you’re there subscribe and receive our weekly podcast (or the transcripts) where I interview Australia’s leading property experts. 

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Australia's leading independent property commentator, brings together leading authorities on the property market. Each week at Real Estate Talk we take a fresh look at the property market so you get all the facts to help you make the right choice.

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