Second Mortgage & Private Loans
What is a Second Mortgage?
- The first mortgagee (usually a bank) is paid out first if the property is sold or repossessed.
- The second mortgagee is paid only after the first lender is fully repaid.
- Security: Registered on the title as a second charge.
- Higher risk for the lender: Because they rank behind the first mortgagee, the lender has less security.
- Higher interest rates: To compensate for the increased risk.
- Used for:
- Debt consolidation
- Funding litigation
- Business or investment purposes
- Cash flow needs where a bank will not extend further credit
- Requires consent or notification to the first mortgagee.
- Usually involves additional legal fees, valuation, and title searches.
- Borrowers risk losing their home if they default, as both first and second mortgagees can enforce.
What are Private Loans?
- Individuals
- Private lending companies
- Investment groups
- Solicitors’ nominee companies
- Short-term commercial lenders
- Flexible terms: Private lenders often lend where banks refuse (e.g., poor credit history, urgent settlement).
- Higher cost of borrowing:
- Higher interest rates
- Fees for establishment, documentation, valuations, and lender’s legal costs
- Shorter loan terms: Often 6–24 months.
- May or may not be secured:
- Some private loans are unsecured
- Many are secured by a second mortgage, caveat, or other personal assets
- Urgency or time-sensitive transactions
- Need for bridging finance
- Inability to meet strict bank lending criteria
- Funding for business ventures, litigation, or property development
Relationship Between Second Mortgages and Private Loans
- Many private loans are structured as second mortgages, especially when the borrower needs quick access to funds.
- The loan terms can be more commercially aggressive, including default interest, monthly fees, and cost recovery clauses.
4. Risks to Borrowers
- Loss of equity: Because second mortgages usually have high interest and fees, equity can be eroded quickly.
- Default interest rates: Can be significant if payments are missed.
- Enforcement action: Private lenders may take rapid legal steps if the borrower defaults.
- Costs: Borrower usually pays both sides’ legal costs under the loan agreement or mortgage.
Whether it’s a change in equity levels, leverage available, pre-sale conditions or general risk appetite, it makes commercial sense to engage with the experience of The Mortgage Tree who can command the wider market knowledge of senior debt, mezzanine funding and preference equity.
We have lenders who consider financing on senior debt positions in the development stage of assets, which reflects both characteristics of the finished assets and of the development process:
High quality and marketable residential assets upon completion supporting take out.
Limited development sizes and exposures, with numerous positive consequences for risk.
Prudent lending terms.
Well understood, straight forward and reliable development pathways, approvals and build requirements.
Predictable and relatively short term timeframes.
Experienced developers with high quality track records and seeking repeat funding, and
Strong ongoing deal flow reflecting long term redevelopment demographic
Risks to Borrowers
- Loss of equity: Because second mortgages usually have high interest and fees, equity can be eroded quickly.
- Default interest rates: Can be significant if payments are missed.
- Enforcement action: Private lenders may take rapid legal steps if the borrower defaults.
- Costs: Borrower usually pays both sides’ legal costs under the loan agreement or mortgage.
Whether it’s a change in equity levels, leverage available, pre-sale conditions or general risk appetite, it makes commercial sense to engage with the experience of The Mortgage Tree who can command the wider market knowledge of senior debt, mezzanine funding and preference equity.
We have lenders who consider financing on senior debt positions in the development stage of assets, which reflects both characteristics of the finished assets and of the development process:
High quality and marketable residential assets upon completion supporting take out.
Limited development sizes and exposures, with numerous positive consequences for risk.
Prudent lending terms.
Well understood, straight forward and reliable development pathways, approvals and build requirements.
Predictable and relatively short term timeframes.
Experienced developers with high quality track records and seeking repeat funding, and
Strong ongoing deal flow reflecting long term redevelopment demographic
Second Mortgages and Private Loans Services
First Home Buyers
Whether you’re a First Home Buyer or buying your first investment property, this can be challenging and confusing process and you don’t know where to begin. That’s why at The Mortgage Tree will guide you through every step of the way, from what information your need to supply to qualify for a loan and to help you lodge the First Home Owners Grant.
Home Loans
Buying a home is one of the most significant purchases in your life, which means that you need the right loan professional by your side to help you throughout the whole journey. I’m here for you.
Investment Property Loans
Building an investment portfolio is a savvy way to build wealth, but it’s not just the property you need to consider- it’s also the loan structure as well. I can help you get the most out of your investment with lower interest rates and higher tax deductions.
Refinancing Loans
The finance market changes rapidly, even after only a few months, which means that loan which was chosen as the best option at the time can become less optimal as new ones are introduced. I can do a regular loan health check to ensure you’re always on the best package, and even switch you from variable to fixed rates as needed.
Lines of Credit / Equity Loan
This refers to when you borrow money using the equity available in your current properties, which is the current market value minus any money you still owe. I can help organise appraisals and access the equity of your current portfolio to help finance your next loan.
Low Doc / Non-Conforming Loans
Whether you’re a small business owner, contractor, tradesperson or large business owner, it can be challenging trying to get a home loan when you’re self-employed. That’s where The Mortgage Tree can help, as we have a range of lenders who can lend up to 80% of the property value without any tax returns or financials. All you need is your Business Activity Statement (BAS) for the last 3 to 12 months, and an Income Declaration provided by your accountant to declare their knowledge of the business and is reasonable estimate of the business’ annual income.