Why You Should Never Use the Same Bank Twice

At this point, it’s important to point out a very important rule: where possible, try not to use the same bank twice. If you go back to Bank A and ask for the money for your next property, they’ll welcome you with open arms. But they won’t structure it the way you actually want.

What the Bank Will Do Instead

Instead of structuring your second loan cleanly, the bank will typically offer to lend you 100% of the purchase price and all of the costs. For example, on a $400,000 property with $20,000 in costs, they might lend you the full $420,000.

Then they’ll do something called cross-collateralising your two properties together. In plain terms, that means if you default on the mortgage on one property, the bank can sell both of them to recover its money. That’s not a position you want to be in if one of those two properties happens to be your own home.

Why This Eventually Stops Your Portfolio Cold

Here’s the part that matters most: banks will keep cross-collateralising your properties until you get to around four. Then they’ll simply stop lending you money — because at that point, you become too big a risk for them. If you default on a single day, they lose four mortgages at once.

Worse still, other banks won’t be interested in you either, because you’re now overexposed to that first bank. From their perspective, you’re already carrying too much risk with someone else.

The Better Approach

The best policy is to use only one lender per property. There are approximately 150 lenders in Australia, which means you could theoretically own 150 properties before you’d ever need to go back to your first lender again.

Sometimes, when pushing the growth of your portfolio aggressively, you may have no real choice but to go back to the same bank for a second or even third loan. But you should genuinely try to avoid it wherever possible.

Why This Matters More the Bigger Your Portfolio Gets

This rule barely matters for your first property. It starts to matter enormously from your second property onward, because every additional loan you take with the same lender compounds your exposure and narrows your future options. Spreading your lending across different institutions from early on keeps your portfolio’s growth in your hands, rather than in the hands of a single bank’s risk appetite.

Frequently Asked Questions

What does it mean to cross-collateralise properties? It means a bank links two or more of your properties together as security for a loan. If you default on one, the bank can sell any or all of the linked properties to recover what’s owed — including a property you didn’t intend to put at risk, such as your own home.

Why do banks stop lending after about four cross-collateralised properties? Because at that point, a single default would cost the bank four mortgages at once, making you too concentrated a risk. Other banks are also likely to see you as overexposed to your existing lender and become reluctant to lend to you as well.

How many lenders are there in Australia? Approximately 150. Spreading your loans across different lenders, rather than returning to the same one, means you’re far less likely to hit a lending ceiling as your portfolio grows.

Is it ever okay to use the same bank twice? Sometimes, if you’re growing your portfolio aggressively, you may have limited alternatives and need to go back to the same lender for a second or third loan. It’s not disqualifying, but it should be avoided where a genuine alternative exists.

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📗 Safe As Houses – ADF Edition — the full lending-structure chapter this article is drawn from 👉 www.integritypropertyinvestment.com.au/safe-houses-adf/

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-The Integrity Team