Cross-collateralization is when a lender secures a loan for one property using another property you own as additional security. It’s commonly encountered when financing investment properties, and as of December 2025, it’s a practice many Victorian property owners are aware of, particularly those with multiple holdings.
In Melbourne, and specifically within the Eastern Suburbs where Fletchers operates, we’re seeing cross-collateralization frequently used when owners refinance or borrow against existing equity. For example, if you own a family home in Balwyn and an investment property in Ringwood, a lender might require both properties to secure a loan taken out against the investment property. This means if you default on the investment property loan, the lender has recourse to the equity in your primary residence. Currently in Melbourne, lenders are increasingly scrutinising debt service ratios, and cross-collateralization allows them to mitigate risk. It can impact your borrowing capacity for future purchases, as the total debt secured against all properties is considered. Understanding this is crucial when planning your investment strategy, and in 2026, we anticipate lenders will continue to favour this approach for higher loan-to-value ratios. It’s important to realise that selling one property can be complicated if cross-collateralization is in place, requiring either loan restructuring or full repayment.
Essentially, cross-collateralization links the financial performance of your properties, influencing your overall borrowing power and saleability.