A property investor warns against cross-collateralizing loans across multiple properties. If the bank tightens lending rules or you miss payments, they can lock both properties at once and force you to sell. Keep each loan separate to protect your assets.
When you're structuring your loan, there's a couple of key things to remember. What a lot of brokers will try and get you to do is if you want to buy, use that equity, buy another property, what they will do is go, no, don't get the equity out, don't worry about it. All you need to do is bring another property to the table, bring the contract to us, don't get any equity out, and we're going to sandwich these 2 things together and do what is called cross-collateralization or cross-securitization. The banks love it and everyone's happy except for you. Now, as long as you're paying your loan, you may not have any problems whatsoever, but anytime the bank changes their criteria, anytime there's an economic emergency, anytime there's a problem, what the banks could do is they can tie both of those properties up, not allow you to get access to your equity, do some really quite horrible things, right? I've seen people lose their homes, seen people lose businesses. Do not cross-securitize, right? It should be one of your core rules.
