Glossary
Cross-collateralisation
Cross-collateralisation is when several properties secure several loans together, so each property stands as security for all the debts, not just the loan used to buy it. Releasing one property usually needs the lender's consent and may require a payment.
An example
An investor holds three properties with one lender, and each mortgage secures all money owed to that lender. When one property is sold, the lender decides how much of the proceeds to keep and whether the remaining security is enough.
Why it matters
Cross-collateralised structures can make it harder to sell, refinance or move a single property. They also expose every property to a problem with any one loan. Separating security across lenders or loans can give more flexibility, though it may change the terms offered.
Points to check
Before agreeing to cross-securing, ask what you would need to do to sell or refinance one property on its own, including any partial repayment the lender would require and how it would revalue the remaining properties. Check whether a default on one loan would allow enforcement against all the properties. Some borrowers prefer separate lenders or separate securities so that each property can be dealt with separately from the others.