Using more than one property

Sometimes one property isn’t quite enough to cover what the business needs. Sometimes it’s more than enough, but it’s the family home and you’d rather leave it out. In both cases, offering security over more than one property gives a private lender a fuller picture and gives you more control over the outcome.

How combined security works

A lender adds up the value of every property offered, adds up everything already owed against them, then adds the new loan. The result is a combined loan-to-value ratio across the whole package.

Property	Value	Existing debt
Home	$1,200,000	$500,000
Investment unit	$650,000	$300,000
Totals	$1,850,000	$800,000
New private loan		$400,000
Combined LVR		About 65 percent

On its own, the home might support part of the loan, and the unit not much at all. Together, they comfortably support the full amount.

Reasons to use more than one property

• A bigger loan. Larger amounts, like an acquisition or a premises purchase, often need more security than one property provides.
• A stronger offer. More security can bring a larger amount, a longer term or a better price.
• Protecting the home. Several investment or commercial properties can carry a loan so the family home stays clear.
• Balancing risk. A rural or specialised property that’s hard to value alone becomes acceptable alongside a standard house.

Choosing which properties to offer

Think about what each property brings and what you’d want back first. A property you plan to sell soon is useful security but will need releasing on sale. A property you’d never want to lose is better left out if others can do the job. Your accountant may also have views on which entity should provide security, for tax and asset protection reasons.

Releasing a property during the loan

Agree the rules for partial release at the start. A typical approach lets you release a property once the loan has been reduced enough that the remaining properties still cover it comfortably. If a property is sold, the lender will usually want the net proceeds applied to the loan before it signs the discharge.

Ask the lender to write the release terms into the letter of offer, including any fees for each discharge, so you know exactly what happens when the time comes.

What it costs to add properties

Each property usually brings its own valuation, title searches and legal work, and sometimes registration fees in more than one state. These costs add up, so it’s worth only including properties the deal genuinely needs. A lender may accept a desktop valuation on a lower-value property to save time and cost.

A worked example

A Sunshine Coast civil contractor needed $1.2 million to buy a competitor’s business, including plant and contracts. The family home at Buderim had good equity, but the owners preferred to keep it out of the deal. They also owned a rental house in Caloundra and a light industrial unit in Kunda Park.

A private lender took a first mortgage over the industrial unit, which had no debt, and a second mortgage over the rental house. Together, those two properties supported the full amount at a combined LVR the lender was happy with, and the home wasn’t touched. The term was twelve months, with a release clause allowing the rental house to be discharged once the loan was reduced below $700,000. The contractor later sold surplus plant from the acquired business, reduced the balance, and had the rental released ahead of a bank refinance on the unit.

Properties in different states

Offering security in more than one state is common and adds only modest complexity. Each state has its own titles office and registration process, so the lender’s solicitor will lodge documents separately, and timing can differ slightly. Allow an extra day or two, and make sure the lender is comfortable lending in each location. A Brisbane apartment and a Sydney house can sit in the same package.

Mistakes to avoid with multiple securities

• offering every property you own when two would do, which adds cost and ties up assets you may want to sell
• forgetting that each first mortgagee may need to consent to a second mortgage
• not agreeing release terms in writing before settlement
• leaving a co-owner of one property out of the conversation until the documents arrive
• assuming the property you plan to sell can be released without reducing the loan first

Tell us about your properties

List each property, its value, what’s owed and who owns it. We’ll show you the strongest combination and whether you can keep the home out. There’s no credit check when you first enquire, and your details aren’t spread around lenders.

Accurate figures for every property get you a reliable first answer. Start your enquiry, or read about borrowing behind an existing mortgage and then check your eligibility.