When connecting to a BGP neighbor that is dual-homed, using loopbacks is recommended although the “update-source x” command must be used to ensure the router sources packets from that loopback interface.
For eBGP neighbors, a rule applies by default whereby eBGP neighbors must be directly connected. Neighbors that have the update-source parameter set to a loopback interface are not seen as being directly connected (they are seen as one hop away) and therefore neighbor relationships will not form. Therefore ebgp-multihop needs to be enabled.
