Owning more than one property is a great way to build wealth, but it also comes with important decisions about how to structure your lending. One of the biggest risks I see as a mortgage adviser is when banks link multiple properties together under the same lending arrangement.
At first glance, this may seem like the easiest option, but in reality, it’s often not in your best interests.
Why Do Banks Link Properties?
Banks and non-bank lenders like to have as much control as possible. By cross-collateralising your loans (linking your home, rental, or even business lending together), they reduce their own risk.
The problem? This setup protects the bank’s interests, not yours.
When your properties are tied together, you lose flexibility. For example, if you decide to sell one property, the bank will often reassess your entire financial position and may require you to use the sale proceeds to reduce debt across other loans, even if that wasn’t your plan.
Financing Properties Together vs. Separately
Yes, it’s easier to bundle everything with one lender. But “easy” is not a good reason to do it.
Keeping properties separate gives you more control. It ensures that if you sell or restructure one property, your other properties aren’t automatically dragged into the process.
Unfortunately, many people only find out the risks when it’s too late. Over the years at Mortgage Sense, I’ve spoken to countless property owners who discovered their bank had tied up all of their assets without clearly explaining the long-term consequences.
How Bank Policy Changes Can Catch You Out
Bank and Reserve Bank policies don’t stay the same forever.
A good example is the Loan-to-Value Ratio (LVR) rules, which were introduced and adjusted over recent years. These changes meant that investment properties could suddenly only be financed up to 70%, while owner-occupied homes remained at 80%.
For borrowers with everything tied together at one bank, this created major issues. Suddenly, people who thought they were in a strong position were being told they needed to pay down extra debt before they could move forward.
By contrast, those who kept their lending structures separate often avoided these roadblocks.
Why Independent Advice Matters
At Mortgage Sense, my job is to put your interests first. That means making sure you understand the risks of linking your properties and helping you keep as much control as possible.
In many cases, the best approach is to spread lending across different banks or lenders. While it may seem more complicated at first, it often gives you greater flexibility and protects you from being caught out by policy changes or forced decisions later on.
Sometimes clients choose to stick with one bank and that’s okay too, but I always make sure you know the risks. The key is to make an informed choice, not just follow the path of least resistance.
The Bottom Line
Cross-collateralisation may suit the bank, but it rarely suits the borrower.
If you own more than one property (or are planning to), I strongly recommend seeking independent advice before letting your lender tie everything together. The goal is simple: keep control in your hands, not the bank’s.
At Mortgage Sense, we work with multiple banks and lenders across New Zealand to ensure you get the structure that suits you best.
Get in touch today to discuss your property portfolio and make sure your lending is set up to work for you, not against you.
