Non-bank second mortgages: who actually lends behind your bank, and what they want

Ask a bank for a loan secured behind another bank’s mortgage and you’ll usually get a polite no, or an offer to refinance everything. Neither helps when you need $120,000 by the end of next week. That gap is where non-bank second mortgages live.

What does “non-bank” actually mean on a second mortgage?

It means the money comes from a lender that isn’t an authorised deposit-taking bank. In practice that’s usually one of three types:

• Private credit funds that pool money from investors and lend it against property.
• Mortgage funds and contributory schemes that match a specific loan with specific investors.
• Specialist business lenders that fund themselves through wholesale lines and focus on short-term secured lending.

They’re a bigger part of the landscape than many people assume, though still small next to the banks. The Reserve Bank’s March 2026 Financial Stability Review says non-bank lenders “still only account for 6 per cent of financial system assets”, while noting that their business and housing lending growth “has remained strong” (RBA).

What matters to you isn’t the funding model. It’s that these lenders are set up to do what banks generally won’t: take second place on title, for a short term, for a business purpose, and decide quickly.

Why do non-bank lenders take second place when banks won’t?

A bank’s lending engine is built around first-ranking security, long terms and standard repayment tests. A second mortgage breaks all three. It ranks behind someone else, it’s short, and its repayment usually comes in one lump from a sale or refinance rather than monthly from profit.

Non-bank lenders price and structure for exactly that. They accept the second seat, look harder at the equity and the exit, and compensate for the extra risk in their pricing and fees. The government’s business portal says non-bank lenders may have “more flexible loan criteria than traditional banks” but may also charge more (business.gov.au). That’s the honest trade: speed and flexibility in exchange for a higher cost, for a short time.

What does a non-bank lender look at instead?

A bank tends to focus on	A non-bank second mortgage lender focuses on
Two years of financials and tax returns	The equity left after the first mortgage
Monthly repayment capacity from profit	How and when the loan will be repaid in full
A clean credit file and no tax arrears	The reason for any credit issue or ATO debt, and whether this loan fixes it
First-ranking security	Second-ranking security, with the first lender’s position understood
Weeks of credit process	A decision once property, purpose and exit are clear

That’s why owners with a tax debt, a recent credit hiccup or accounts that are a year behind can still get a yes — the loan stands on the property and the exit, not on how last year’s profit and loss reads. Our bank said no page covers the most common reasons banks decline files that private lenders will look at.

What should you ask any non-bank lender?

Most non-bank lenders are well run. Still, the documents differ more from lender to lender than bank documents do, so check:

1. Who is the lender of record? The fund or company named on the mortgage, not just the brand on the website.
2. What is every cost in dollars? Establishment, legal, valuation, any line fee, and the discharge fee. Our guide to what short-term loans cost explains each one.
3. How is interest handled? Paid monthly, prepaid at settlement or capitalised onto the balance.
4. What happens if the exit runs late? Extension fees, default terms and how much notice you get.
5. Can you repay early, and what does that cost?
6. Does the first mortgage need consent for a second to be registered?

Clear answers to those six questions are a good sign. Vague ones aren’t.

Ready to see whether a non-bank second mortgage suits your property? Start a 60-second enquiry and we’ll come back with options from one desk, not a dozen.

Illustrative example: clearing a tax debt behind a bank loan

Illustrative only — rounded figures, no real client.

A Perth café group has a $260,000 ATO debt that has been sitting overdue for a while. Once an ABN holder has $100,000 or more of tax debt that’s more than 90 days overdue, and isn’t working with the ATO to deal with it, the ATO may disclose that debt to credit bureaus after 28 days’ written notice (ATO). The owner wants it cleared before that notice turns into a listing.

The owner’s home in Perth’s southern suburbs is worth about $1,300,000, with $520,000 owing to the bank.

• Combined debt after a $270,000 second mortgage (debt plus legal and settlement costs): $790,000.
• Combined LVR: roughly 61%.

The bank declined to lend more because of the tax arrears. A non-bank lender looks at the same file and sees solid equity, a specific purpose (pay the ATO in full) and an exit: the owner is selling one of the three cafés, with the sale expected to complete in a few months. Because the property is in Western Australia, the security is a registered second mortgage rather than a caveat — and it does the same job just as fast. See loans to pay an ATO debt for more on this scenario.

How does a non-bank second mortgage end?

Usually in one payment. The planned exit — sale, refinance or a confirmed receivable — pays out the second mortgage, the lender discharges it from the title, and your bank loan carries on as if nothing happened. If the exit is a refinance back to a bank, the cleaner your accounts and tax position by then, the easier that step is. That’s often the whole point: use the non-bank loan to fix the problem the bank didn’t like, then go back to the bank.

Deal with the lender direct — see if you qualify

Non-bank lenders vary widely in what they like. Some prefer houses, some commercial property; some are comfortable with tax debt, others less so. We lend against both and look at tax debt case by case, so you get a straight answer from the people who actually fund the loan.

The enquiry form needs roughly 60 seconds of your time, and nobody runs a credit check when you first enquire. We don’t spray your file across a list of lenders and leave you fielding calls — one real person reviews it and rings you. Please answer accurately, especially the property’s location and state, the amount owed on the first mortgage, any tax debt and your deadline.

Get a straight answer from the lender →