Private mortgages are one of the fastest-growing segments of Australian property finance. Yet many borrowers still aren't clear on what they are, how they work, or when they make sense. This guide breaks it down plainly.
At Secured Lending, we specialise in fast private mortgage solutions for borrowers who need certainty, speed, and flexibility. As a private mortgage lender in Australia, we help borrowers who've been turned away by a bank or simply can't wait on a traditional approval timeline. Understanding private lending is a good place to start.
What Is a Private Mortgage?
A private mortgage is a loan secured against property that is funded by a non-bank lender. Instead of borrowing from a major bank or credit union, you borrow from a private lending institution or fund.
The loan is secured by a registered mortgage over real property, just like a traditional bank loan. The key difference is who is lending the money and how decisions are made.
Private lenders assess deals based on the strength of the security and the merits of the transaction. They are not bound by the rigid credit policies and automated assessment systems that govern bank lending.
How Does a Private Mortgage Work?
The structure of a private mortgage is straightforward.
- •A borrower applies for a loan secured against a property asset
- •The lender assesses the security value, loan-to-value ratio (LVR), and the borrower's exit strategy
- •If approved, the lender registers a mortgage over the property
- •The borrower receives funds, typically within days rather than weeks
- •The loan is repaid according to agreed terms, usually through refinance, asset sale, or business cash flow
Private mortgages are most commonly short to medium term. Terms typically range from one month to two years, though some lenders offer longer arrangements depending on the deal.
Interest rates are higher than bank rates. This reflects the speed, flexibility, and risk appetite private lenders bring to transactions that banks won't touch.
First Mortgage vs Second Mortgage
Private mortgages can be structured as either a first mortgage or a second mortgage.
A first mortgage means the private lender holds the primary security position over the property. This is the lowest-risk position for the lender and typically attracts the most competitive rates available in the private lending space.
A second mortgage sits behind an existing first mortgage. The private lender takes a subordinate security position. This structure allows borrowers to unlock equity in a property without disturbing an existing loan. The risk to the lender is higher, and rates reflect that.
Both structures are legitimate and widely used. The right choice depends on the existing encumbrances on the property and how much equity is available.
Who Uses Private Mortgages?
Private mortgage lending is not a last resort for distressed borrowers. It is a deliberate financing tool used by experienced property investors, developers, and business owners.
Common use cases include:
Commercial property purchase. Many commercial transactions move fast. Bank timelines don't always align with contract deadlines. A private mortgage for commercial property purchase can fund settlement within days when a bank approval would take weeks or months.
Investment property purchase. Property investors use private lending to act quickly on opportunities. A private mortgage for investment property allows investors to secure a deal now and refinance to a lower-rate facility once the transaction is complete.
Bridging finance. When a borrower needs to complete a purchase before selling an existing asset, a bridging loan bridges the gap. Private lenders are well-suited to this because they assess on security and exit strategy rather than servicing alone.
Business cash flow. Property-owning businesses use private mortgages to unlock equity quickly for working capital, expansion, or debt consolidation without selling assets.
Complex credit situations. Borrowers with impaired credit, incomplete financials, or non-standard income structures often cannot access bank finance. Private lenders look at the whole picture.
"Most of our clients aren't new to property. They understand leverage and they understand risk. What they need is a lender who can read a deal quickly and give them a clear answer. Private mortgage lending is built for that."
Gino Tabila, Associate Director, Secured Lending
How Is a Private Mortgage Different from a Bank Loan?
The differences come down to assessment, speed, and flexibility.
Banks use standardised credit policies. They assess income through payslips or tax returns, apply debt-to-income ratios, and run automated approval processes. This works well for straightforward borrowers with clean financials and time on their side.
Private lenders assess on security value and deal logic. If the property is strong, the LVR is sensible, and there is a credible exit strategy, the deal can proceed. The borrower's income complexity is far less of a barrier.
Speed is the other major differentiator. Bank approvals can take four to eight weeks. Private mortgage approvals and settlements can happen in two to five business days.
What Are the Costs Involved?
Private mortgage lending is more expensive than bank lending. Borrowers should understand the cost structure before proceeding.
Interest rate. Private mortgage rates in Australia typically range from 8% to 15% per annum, depending on the lender, LVR, security quality, and loan complexity.
Establishment fee. Most private lenders charge an upfront fee to establish the loan. This is usually between 1% and 2% of the loan amount.
Legal and valuation costs. Borrowers are generally responsible for their own legal costs and may need to fund a lender-ordered valuation.
Exit or discharge fee. Some lenders charge a fee when the loan is repaid. It is important to understand this before signing.
The short-term nature of most private mortgages means the overall cost is manageable when viewed against the value of the outcome. A borrower who secures a commercial property at the right price or avoids a contract default is often well ahead despite the higher rate.
Is a Private Mortgage Regulated?
Yes. Private mortgage lending in Australia is a regulated activity. Lenders must hold an Australian Credit Licence (ACL) to offer loans to consumers. Responsible lending obligations apply to consumer-purpose loans.
Business-purpose loans, which make up the majority of private mortgage transactions, are subject to different regulatory frameworks. This allows lenders more flexibility in structuring deals for sophisticated borrowers.
Working with Secured Lending
Secured Lending is a specialist private mortgage lender with a track record of fast, decisive lending decisions. We fund first and second mortgage facilities for commercial property, investment property, and business purposes across Australia.
Our team reviews deals quickly. We understand that timing is often the point. If you need a private mortgage and you need it fast, we're built for that.
Explore our commercial property private mortgage solutions or learn more about investment property private lending to see how we can help. To discuss your scenario, speak to our team.
