If you're researching private mortgage lending, the rate is usually one of the first things you want to understand. Private mortgage rates are higher than bank rates. That's a fact. But the reasons why, and the factors that move the rate up or down, are worth knowing before you approach a lender.
At Secured Lending, we price each deal on its merits. As a private mortgage lender in Australia, we're transparent about how we assess risk and structure our rates. This guide explains what drives private mortgage pricing in Australia so you can approach your next deal with clear expectations.
What Are Typical Private Mortgage Rates in Australia?
Private mortgage rates in Australia generally sit between 8% and 15% per annum. Some specialist transactions outside this range exist, but this band covers the majority of deals in the market.
By comparison, major bank variable rates for commercial property loans typically sit between 6% and 8% at the time of writing. The gap between private and bank pricing reflects the fundamental differences between the two types of lending: speed, flexibility, and the risk profile of the transactions private lenders take on.
It's also worth noting that private mortgage rates are almost always quoted on a monthly basis in deal sheets and term sheets. A rate of 1% per month equals 12% per annum. Make sure you're comparing on the same basis when evaluating offers.
What Factors Influence Your Private Mortgage Rate?
No two private mortgage deals are identical. Lenders price based on a combination of factors. Understanding these gives you a better position to negotiate and structure your application.
Loan-to-Value Ratio (LVR)
LVR is the single biggest rate driver in private mortgage lending. It measures the loan amount as a percentage of the property's assessed value.
A lower LVR means less risk for the lender. More equity in the property means more protection if the borrower defaults and the security needs to be enforced. Private lenders will generally offer better rates on deals where the LVR is below 60% to 65%.
High LVR deals, particularly those approaching 75% or above, carry more risk. Lenders price that risk into the rate accordingly.
Security Quality
Not all property is equal as security. A well-located, readily saleable commercial or residential property in a major metro area is considered strong security. Rural land, specialised industrial assets, or properties in thin markets are assessed more cautiously.
Strong security in a liquid market will attract a more competitive rate. Unusual or hard-to-sell assets will attract a premium.
Loan Purpose and Structure
The purpose of the loan affects how lenders assess risk. A commercial property purchase with a clear settlement deadline is a straightforward proposition. A bridging loan involving multiple properties and a complex exit is inherently more layered.
Lenders also consider whether the loan is a first mortgage or a second mortgage. First mortgage positions carry lower risk. Second mortgage finance sits behind an existing debt and attracts a higher rate to reflect the subordinate security position.
Loan Term
Short-term loans of one to three months generally attract higher monthly rates than six to twelve-month facilities. Lenders need to cover their establishment costs and risk exposure regardless of the loan duration.
For investment property private mortgages, borrowers planning to hold a facility for six to twelve months while they arrange longer-term finance will often find pricing more favourable than those seeking a very short bridge of four to six weeks.
Borrower Profile and Exit Strategy
Private lenders are asset-led, but they still assess the borrower. An experienced property investor with a clear, credible exit strategy will be viewed differently from a borrower with no exit plan and a complicated credit history.
The exit strategy is critical. Lenders want to understand how the loan gets repaid. Refinance to a bank, sale of the property, or incoming business revenue are all acceptable exits if they are realistic and supported by evidence.
A well-prepared application with a clear exit strategy will often result in a better rate than a similar deal that comes in incomplete.
Market Conditions and Funder Appetite
Private lender rates also move with the broader funding market. When the cost of capital rises, lenders pass that through to borrowers. During periods of tighter credit availability, rates tend to firm across the board.
Individual lenders also have appetite cycles. A lender that is fully deployed in a particular asset class or geography may price new deals in that category higher to manage concentration risk.
How to Compare Private Mortgage Offers
When comparing offers from different private lenders, look beyond the headline rate.
Total cost of credit. Add up the interest, establishment fee, legal costs, and any exit or discharge fees. Compare the total cost of the loan, not just the rate.
Flexibility clauses. Can you repay early without penalty? Is there a default rate and when does it kick in? These terms matter if the deal timeline shifts.
Drawdown speed. If speed is the reason you're using private lending, confirm how quickly the lender can actually fund. Ask for evidence of recent settlement timelines.
Lender experience in your asset class. A lender who regularly funds commercial property deals will process your application more efficiently than one who mainly does residential transactions.
"Sophisticated borrowers don't fixate on the rate in isolation. They look at the cost of the capital relative to the outcome it unlocks. A 10% facility that lets you secure a $4 million asset at the right price is not expensive. Missing that asset because you waited on a bank is."
Gino Tabila, Associate Director, Secured Lending
Is the Higher Rate Worth It?
This is the right question to ask. The answer depends entirely on the opportunity or problem you're solving.
A borrower who secures a commercial property at a competitive price because they could settle in five days has captured a value that likely far exceeds the cost of the private mortgage rate. A developer who avoids a contract default using a bridging facility has avoided penalties, legal costs, and reputational damage.
Rate is one input. Outcome is what matters.
How Secured Lending Prices Deals
At Secured Lending, we assess each deal individually. Our team reviews security quality, LVR, loan purpose, and exit strategy to arrive at a rate that reflects the actual risk of the transaction.
We're transparent, fast, and direct. We don't drag out the assessment process. If a deal works, we'll tell you quickly. If it doesn't, we'll tell you that too.
Talk to us about your private mortgage requirements or explore our first mortgage options to see how we structure competitive facilities for serious borrowers.
