Private mortgage loans offer Australians an alternative path to property financing with faster approval and more flexible criteria than banks.
What is a Private Mortgage Loan?
A private mortgage loan is a loan secured by property mortgage from a non-bank lender (private individual, mortgage trust, or private credit fund).
Key Features:
- Secured by property (first or second mortgage)
- Terms: 1-5 years typical (some longer)
- Rates: 7-15% p.a. (higher than banks)
- Approval: 7-21 days (faster than banks)
- LVR: Up to 75% typically
Types of Private Mortgage Loans
First Mortgage Loans
Position: First (sole) mortgage on property LVR: Up to 70-75% Rates: 7-12% p.a. (lowest private rates) Best for: Unencumbered property, lower rates
Second Mortgage Loans
Position: Behind existing first mortgage LVR: Combined up to 75-80% Rates: 9-18% p.a. Best for: Access equity without refinancing
Caveat Loans
Position: Caveat (not registered mortgage) Term: 1-12 months (very short-term) Rates: 2-4% per month (24-48% p.a.) Best for: Urgent short-term needs
When to Use Private Mortgage Loans
Choose private mortgage when:
✅ Banks declined - Credit, income, or property issues ✅ Speed critical - Need approval within 1-2 weeks ✅ Credit impaired - Defaults, bankruptcy, late payments ✅ Self-employed - Difficulty proving income ✅ Unique property - Rural, unusual construction ✅ Short-term need - Planning to refinance to bank later ✅ Bridging requirement - Between property transactions
Private Mortgage Rates and Fees
Interest Rates (2025):
- First mortgage: 7-12% p.a.
- Second mortgage: 9-18% p.a.
- Credit impaired: 12-20% p.a.
- Short-term caveat: 24-48% p.a.
Fees:
- Establishment: 1-3% of loan
- Valuation: $300-$1,500
- Legal: $1,000-$3,000
- Monthly: $0-$200
- Exit: 0-2%
Example Cost: $400,000 private first mortgage @ 10% p.a., 2 years:
- Interest (I/O): $80,000
- Establishment (2%): $8,000
- Valuation: $1,000
- Legal: $2,000
- Total: $91,000 over 2 years
Requirements for Private Mortgages
Typical Requirements:
✅ Property Equity: At least 25-30% ✅ Exit Strategy: Clear repayment plan ✅ Serviceability: Ability to make repayments ✅ Valid Purpose: Legitimate use of funds
Documents:
- Photo ID (driver's license, passport)
- Property details (rates notice, title)
- Income evidence (varies by lender)
- Existing loan statements
- Credit report explanation (if impaired)
Exit Strategies
Plan your exit before taking the loan:
1. Refinance to Bank (most common)
- Improve credit over 12-24 months
- Build income history
- Refinance to bank at 6-8% p.a.
2. Sale of Property
- Sell property
- Repay loan from proceeds
3. Sale of Other Asset
- Business sale
- Investment sale
- Inheritance
4. Extend Private Loan
- Sometimes extend another term
- Work toward bank refinance
Ready to explore private mortgage options? Connect with private mortgage lenders.