25 Apr 2022

Cross Collateralisation: What Process Do Lenders Follow?

Lenders Approach Cross Collateralisation

The standard home loan remains the conventional mortgage. It requires a 20% deposit, a stellar credit score, and three months’ worth of financial documentation. Thereafter, lenders have developed variations of the mortgage to finance property purchases for individuals in specific situations. For example, small business owners can become homeowners. They will apply for the Mortgage House low doc loan.

Mortgage House also offers home loans specifically for investors. After you satisfy the requirements for the loan and hold the property, the property starts building equity. Equity becomes collateral that investors can use toward another loan to finance a second property. The strategy is also known as cross collateralisation.

From the lender’s perspective, the strategy carries risk for both parties. Lenders go through the usual ratios to assess loan applications from investors. In addition, loan specialists at Mortgage House will assess the market. The goal is to ascertain potential risks. Next, our process will obtain an appraisal of the first property. This determines how much equity exists.

The strategy binds the two properties by merging the two loans. Investors who want to add a third and fourth property can repeat the process. Mortgage House loan specialists will ensure that the investor can handle the additional debt. Thus, rental income plays a role in the process. 

If you’re also in the market for a vehicle, check out our car loan calculator.

How Lenders Approach Cross Collateralisation Conclusion

Cross collateralisation is a viable strategy for individuals seeking to build property portfolios. Once you acquire your first, you can build on it. Contact our loan specialists at Mortgage House to discuss your options.

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