Private second mortgage: borrow behind your bank loan without touching it

Most owners who need a short burst of business funding already have a home loan or a commercial loan they’re happy with. Refinancing that loan just to get an extra $150,000 for a few months would be like moving house to get a bigger fridge. A private second mortgage leaves the existing loan alone and lends against the equity sitting above it.

What is a private second mortgage?

It’s a short-term, business-purpose loan from a non-bank lender, registered on the property’s title in second place. The bank or lender already on title stays first. If the property were ever sold to clear debts, the first lender would be repaid before the second.

Because the private lender accepts that second seat, it looks harder at the equity above the first loan and at how the new loan will be repaid. In return, you get:

• No change to your bank loan — same lender, same repayments, same terms.
• Only the amount you actually need, rather than a whole new loan.
• A quicker path to funds, because the first lender doesn’t have to be paid out or discharge anything.

Loans run from $20,000 to $5,000,000 depending on equity, against residential or commercial property, measured in months rather than decades.

Second mortgage or caveat — which applies in your state?

Short answer: a registered second mortgage works everywhere. Victoria has an extra option.

Where the property is	What we write	Notes
Victoria	Registered second mortgage or a caveat loan	A caveat loan can suit the tightest deadlines — see caveat loans
New South Wales	Registered second mortgage	Lodged electronically, usually arranged just as quickly as a caveat would be
Queensland	Registered second mortgage	Mortgages and caveats have been mandated for eConveyancing since February 2023
WA, SA, Tasmania, ACT, NT	Registered second mortgage	Same short-term job, same business purposes

In Victoria, a caveat is a document lodged against a title that puts anyone dealing with the property on notice that a third party may have rights in it (Land Use Victoria). Elsewhere, we don’t try to force a caveat structure to fit — a registered second mortgage does the job properly and quickly. Our caveat loans outside Victoria page explains the swap in more detail.

How much can you raise behind an existing loan?

We look at total debt against the property’s value — the combined loan-to-value ratio. The government’s business portal describes LVR as the ratio of a loan to the value of the property and says it helps a lender work out whether it could recover the loan if things go wrong (business.gov.au).

The working is simple:

1. Start with the property’s value.
2. Work out the maximum total debt we’ll accept against it.
3. Subtract what’s owed on the first mortgage.
4. What’s left is the room for a second mortgage — less any interest we hold back or capitalise.

What moves the maximum? Property type (a suburban house versus a rural block), location, condition, the borrower’s track record and, above all, how believable the exit is. The how much can I borrow tool gives a rough first figure, and how equity is calculated goes deeper.

Illustrative example: a Brisbane landscaper with a contract to fund

Illustrative only — round numbers, not a real client.

A landscaping company wins a council contract that requires a new excavator and a crew before the first progress payment. The owner needs $220,000 within ten days. Their brick home in Brisbane’s north is worth about $1,100,000, with $450,000 owing to the bank on a loan they don’t want to disturb.

	Amount
Property value	$1,100,000
Existing bank loan	$450,000
New private second mortgage	$220,000
Combined debt	$670,000
Combined LVR	about 61%

The bank loan stays exactly as it is. The second mortgage registers behind it, electronically, and the funds go to the business. The exit is the first two progress payments plus a refinance of the excavator onto equipment finance once it’s delivered — a matter of months.

Because the house is in Queensland, a caveat loan isn’t the tool — and it doesn’t need to be. The registered second mortgage does the identical job.

Want to know what your own equity could support? Run your numbers past us in about a minute.

What makes a private second mortgage quick — or slow?

Quick files share a few things:

• A clear first-mortgage picture. A recent statement showing what’s owed, and whether the first mortgage needs consent for a second.
• A property that’s easy to value — or an existing recent valuation we can rely on.
• Every owner available to sign. If the house is in two names, both need to sign, even if only one runs the business.
• An exit with a date on it. A sale contract, a refinance approval in progress or a confirmed receivable.

Slow files usually stall on one of these: a first lender whose consent is needed and who takes its time, a co-owner who isn’t on board, or a vague exit. Queensland’s eConveyancing mandate covers mortgages and caveats signed from 20 February 2023 (Titles Queensland), and electronic lodgement is the norm in the other major states, so the registry is rarely the bottleneck.

For how the costs are structured on a short-term second mortgage — establishment, legal, valuation, interest options and discharge — see what short-term loans cost.

Tell us about the property and the deadline

A second mortgage is often the simplest way to turn equity into working money without upsetting the loan you already have. Whether it’s the right fit comes down to a few facts about the property and how quickly you need to move.

Filling in the enquiry takes about 60 seconds, and there’s no credit check when you first enquire. Your details don’t get passed around a pile of lenders — a real person on our credit team reviews them and rings you, with no broker standing between you and the money. The more accurate the form, the better the first answer: tell us the property’s state, roughly what it’s worth, what’s owed on it now, and the date you need the money.

Find out what a second mortgage could raise →