Private first mortgages for business

A private first mortgage is the most substantial of the three private structures. The lender sits at the front of the queue on title, which changes what it’s willing to do. Larger loans, longer terms and more room to negotiate all come with first position.

When owners use a private first mortgage

The title is clear. You own the property outright, perhaps a commercial building, a factory or a paid-off home, and want to raise funds against it quickly. A bank would want months of financials; a private lender wants to understand the property and the exit.

The existing lender needs to go. Your bank loan has expired and won’t be renewed, the account is in arrears, or the lender has called the loan in. A private first mortgage pays them out in full and resets the clock.

A purchase needs to settle on time. Buying a commercial property or a business premises with a settlement date the bank can’t hit. The private loan settles the purchase, and the bank refinances it later.

Several debts need to become one. A short-term loan, a tax debt, an equipment facility and a second mortgage can sometimes be rolled into a single first mortgage, simplifying repayments and freeing up cash flow while the business steadies.

How it’s assessed

Private first mortgage lenders still ask the three core questions: security, exit and purpose. Because they’re lending more and for longer, they go a little deeper on each.

• Security: a full valuation, sometimes with a second opinion for specialised property
• Exit: a realistic timeline for refinance or sale, with some evidence (a broker’s pre-assessment, an agent’s appraisal, lodged financials)
• Purpose: what the loan pays out or funds, in detail
• Servicing: how interest will be met, whether from trading cash flow, prepaid interest or capitalised interest

The maximum LVR on a first mortgage is generally higher than in second position on the same property. Commercial, industrial and land securities usually sit lower than residential.

Private first mortgage vs second mortgage

	Private first mortgage	Second mortgage
Existing loan	Paid out, or none exists	Stays in place
Typical size	Largest	Limited by equity behind the first loan
Term	Commonly 6 to 36 months	Commonly 3 to 24 months
Pricing	Usually sharper	Usually higher, reflecting second position
Speed	Days to a couple of weeks	Days

If keeping your current loan matters, perhaps because of a low fixed rate, a second mortgage is usually the better option. If the current loan is the problem, first position is often the answer.

Planning the exit from day one

Most private first mortgages are designed to end with a bank refinance. If that’s your plan, think now about what the bank will need in 12 months:

1. Lodged tax returns and financial statements for the business
2. ATO accounts up to date or on an agreed payment plan
3. A clean repayment record on the private loan itself
4. A clear story about why private finance was needed and what has changed

We can introduce you to people who can help with the refinance when the time comes. A private loan that ends in a sensible bank loan is the outcome everyone wants.

Costs to understand

We don’t publish rates. Costs are built from interest, an establishment fee, valuation, both sets of legal fees, and registration and discharge costs. On first mortgages, interest is often paid monthly, though some lenders allow part of it to be prepaid from the loan.

Ask for every cost as a dollar figure, then use the caveat loan calculator (it works for any short-term private loan) to see the total and your net funds.

Who typically benefits

A private first mortgage often suits an owner whose property is unencumbered, or whose existing bank loan is small enough to pay out entirely. Clearing the bank and putting one lender in first position can make the whole arrangement simpler, with one set of documents and one exit.

Talk to us about first position

If you own property outright or need to pay out an existing lender, tell us about it. We’ll tell you plainly whether a private first mortgage fits and roughly how the numbers look. There’s no credit check when you first enquire, and your file goes to a person on our desk, not to a list of strangers.

The more precisely you describe the property, the existing debt and the deadline, the better we can match you. See if you qualify, or read about refinancing out of a difficult loan first and then get in touch.