Private home loans provide residential mortgage finance when banks can't or won't help, with faster approval and more flexible criteria.
What Are Private Home Loans?
Private home loans are residential mortgages from non-bank private lenders, secured by your home or investment property.
Used for:
- Home purchase (owner-occupier)
- Investment property purchase
- Refinancing existing mortgage
- Equity release
- Debt consolidation
- Renovations
Why Use Private Home Loans?
Banks decline home loans for:
- Credit defaults or bankruptcy
- Self-employed income (hard to prove)
- Recent job changes
- Casual/contract employment
- Too many properties already
- Unusual property types
- Urgent purchase (auction, deadline)
Private lenders offer: ✅ Flexible credit assessment ✅ Fast approval (7-14 days vs 4-8 weeks) ✅ Alternative income verification ✅ Complex situations accepted ✅ Unusual properties considered
Private Home Loan Rates
2025 Rates:
Owner-Occupier:
- Good credit: 7-11% p.a.
- Fair credit: 10-14% p.a.
- Bad credit: 12-16% p.a.
Investment Property:
- Good credit: 8-12% p.a.
- Fair credit: 11-15% p.a.
- Bad credit: 13-17% p.a.
Compare to banks: 5.5-7.5% p.a.
Premium for private: 2-10% higher
Why worth it:
- Get approved when banks decline
- Speed (weeks vs months)
- Secure property you'd otherwise miss
- Bridge to bank refinance later
Example Costs
$500,000 Home Loan, 2 Years
Bank (if approved) @ 6.5%:
- Interest (I/O): $32,500/year
- 2 years: $65,000
Private @ 11%:
- Interest (I/O): $55,000/year
- 2 years: $110,000
- Extra cost: $45,000 over 2 years
But:
- Secured your dream home
- After 2 years, refinance to bank
- 20+ years at bank rate
- Total strategy saves vs renting + missing property
LVR (Loan-to-Value Ratio)
Private home loans:
- First home: Up to 70-75%
- Investment: Up to 65-70%
- Credit impaired: Up to 60-65%
Example:
- Property value: $800,000
- Maximum loan (70%): $560,000
- Need deposit: $240,000 (30%)
If buying:
- Purchase price: $800,000
- Borrow: $560,000
- Need: $240,000 deposit + costs
If refinancing:
- Value: $800,000
- Owing: $400,000
- Can increase to: $560,000
- Cash out: $160,000
Term Length
Typical private home loan terms:
- Short-term: 1-2 years
- Medium: 2-5 years
- Longer: 5-10 years (some lenders)
- Extended: 10-30 years (rare, some lenders)
Most common: 2-3 year term, then refinance to bank
Repayment Options
Interest-Only:
- Most common with private
- Lower monthly payments
- Principal due at end (or refinance)
Principal & Interest:
- Some lenders offer
- Pay down loan over time
- Higher monthly payments
Example $500k:
- Interest-only @ 11%: $4,583/month
- P&I @ 11%, 30yr: $4,762/month
The Refinance Strategy
Most borrowers use private as bridge:
Year 1-2: Private Loan
- Get approved despite current issues
- Buy the home
- Rate: 11% p.a.
- Cost: $55,000/year interest
During private loan:
- Pay on time (builds credit)
- Stabilize employment
- Property value increases
- Fix credit issues
Year 2-3: Refinance to Bank
- Credit improved
- Now meet bank criteria
- Refinance @ 6.5% p.a.
- Save $22,500/year
Result: Win
- Owned home 2 years earlier
- Property appreciated
- Now bank rate for remaining 25+ years
Requirements
Typical requirements: ✅ Deposit 25-30% ✅ Some form of income ✅ Property in acceptable condition ✅ Clear purpose and exit strategy
Credit: Flexible - bad credit often OK
Income verification:
- Bank statements (self-employed)
- Payslips (PAYG)
- Tax returns (sometimes)
- Asset-based (sometimes no income proof)
Property Types Accepted
Most private lenders accept: ✅ Standard houses ✅ Units/apartments ✅ Townhouses ✅ Dual occupancy
Some accept: ✅ Rural residential ✅ Unique construction ✅ Houses on large land ✅ Properties with issues
Generally don't accept: Serviced apartments Company title Extreme locations Unlivable condition
First Home Buyers
Can first home buyers use private?
Yes, but:
- Need 25-30% deposit (more than bank)
- Higher rates
- May not get First Home Owner Grant
- Check with your state
Better strategy:
- Try banks first
- Fix any credit issues
- Use private only if banks decline
- Refinance to bank ASAP
Need private home loan? Connect with private home lenders.