Private first mortgage lenders: when first position is the right short-term move

On a property title, order matters. Whoever is registered first gets paid first if the property is ever sold under pressure. That’s why first position is the strongest seat a lender can take — and why private first mortgage lenders can usually lend more, on more types of property, than a lender sitting further back in the queue.

This page covers when a short-term first mortgage is the right structure, what we need, and the one step that most often slows these deals down.

What do private first mortgage lenders actually do?

They lend short-term against property where nothing else ranks ahead of them. That happens in two ways:

• The property is unencumbered. There’s no existing mortgage, so the new loan registers straight into first place.
• The new loan pays out the old one. At settlement the private lender pays the existing lender, the old mortgage is discharged and the new mortgage takes its spot.

Mortgages across Australia are now registered on a common national form, which ARNECC — the national council that sets the rules for electronic conveyancing — publishes for lenders and their solicitors (ARNECC). That standardisation is part of why a first mortgage in Perth and one in Hobart follow broadly the same steps.

The loans are business-purpose only, run from $20,000 to $5,000,000, and are measured in months, not decades. Security can be residential or commercial.

When is first position the right short-term choice?

First position earns its place in a handful of situations:

• The property is owned outright. No reason to sit behind anyone — go straight to first.
• The loan is large. Bigger loans, particularly toward the top of the $5m range, usually need first-ranking security.
• The security is commercial or industrial. Lenders are generally more comfortable with specialised property when they hold first place. More on that at commercial and industrial property as security.
• The existing lender is the problem. A bank calling in a facility, a loan in arrears or an expiring short-term loan can all be paid out and replaced. If you’re replacing a caveat or another private loan, see caveat loan refinance.
• The exit is a bank refinance. One lender on title makes the hand-back to a bank cleaner later.

When none of those apply — you have a cheap bank loan and just need an extra slice for a few months — a private second mortgage or, in Victoria, a caveat loan is usually the leaner choice.

How does a first mortgage compare with the alternatives?

	Short-term first mortgage	Registered second mortgage	Caveat loan (Victoria)
Where it sits on title	First	Behind the existing mortgage	Caveat lodged against the title
Existing loan	Paid out, or none	Stays in place	Stays in place
Borrowing room	Most	Limited by combined LVR	Limited by combined LVR
Who has to cooperate	Existing lender (payout and discharge)	Usually just you and the new lender	Usually just you and the new lender
Best for	Large loans, commercial property, refinancing out	Keeping a good bank loan while adding a short-term top-up	Fast top-ups on Victorian property

The trade-off is plain: first position gives you the most room, but if an existing loan has to be paid out, you’re relying on that lender to move at your pace.

What slows a private first mortgage down?

Almost always, the outgoing lender. A new first mortgage can’t settle until the old one can be discharged, and that needs a payout figure and the outgoing lender’s participation at settlement. Banks process discharges in their own queue, and that queue doesn’t know about your deadline.

How to stay ahead of it:

1. Ask for your payout figure the day you enquire. It shows exactly what has to be cleared.
2. Tell your current lender you’re refinancing so the discharge request doesn’t sit unread.
3. Check what else is on title. Old caveats, second mortgages or a lender’s interest you’d forgotten about all need dealing with before settlement.
4. Have every owner and director ready to sign — loan documents, guarantees and ID.

Electronic lodgement helps once paperwork is ready. Queensland, for example, has required mortgages and releases of mortgage to be lodged through eConveyancing for instruments signed from 20 February 2023 (Titles Queensland). The registry side is fast; the people side is where time is lost.

If you’re ready to see whether first position suits your property, start a 60-second enquiry and include what’s currently owed.

Illustrative example: refinancing out of a bank to free up cash

Illustrative only — rounded figures, not a real client.

An Adelaide engineering business owns its warehouse unit, worth about $2,000,000. The bank has $600,000 owing and has told the owners it won’t extend the facility at review. At the same time, the business needs $400,000 to fund materials for a defence-supply contract.

• New first mortgage: $600,000 to pay out the bank + $400,000 new money = $1,000,000.
• LVR: $1,000,000 ÷ $2,000,000 = 50%.

A second mortgage won’t work here because the bank wants out, not in. A private first mortgage pays the bank, registers in first place and delivers the $400,000. The exit is a refinance to a new bank once the contract’s first invoices are paid and the accounts show the extra turnover — a few months, not years.

The work that matters most before settlement: ordering the bank’s payout figure on day one and getting all directors’ signatures lined up.

What happens at the end of the term?

A short-term first mortgage is designed to be replaced, not kept. The usual exits:

• Refinance to a bank once the trigger for the short-term loan has passed — a clean set of accounts, a lodged tax return, a contract delivered.
• Sale of the security property or another asset.
• A business event — a sale of the business, an insurance payout, a large receivable.

Agree the term with the exit in mind and leave a little breathing room. If the exit is a bank, ask the bank early what it will want to see. The settlement timeline guide shows how the private side fits around it.

Let a real person check whether first position is your best seat

Sometimes first position is clearly right. Sometimes a smaller second mortgage does the job with less disruption. The quickest way to find out is to put your property and deadline in front of someone who writes both every week.

It takes about 60 seconds and there’s no credit check when you first enquire. We don’t hand your details to a crowd of lenders — one team looks after your file and a real person calls you. Answer the form accurately, particularly the property’s state, what’s owed on it and when you need the funds, and we can tell you on that first call whether a first mortgage makes sense.

Check what first position could unlock →