Second Mortgages for Business: Unlocking Property Equity

A second mortgage is a loan secured against a property that already has a primary (first) mortgage. It sits behind the first mortgage in priority—if the property is sold, the first mortgage is repaid before the second. This higher risk for the lender means higher interest rates, but second mortgages offer unique advantages including speed of access and the ability to preserve your existing first mortgage terms.

Residential security: up to 75% combined LVR (first + second mortgage). Commercial/vacant land: up to 70% combined LVR. Loan amounts range from $250,000 to $12 million+. Terms are typically short (1-24 months). Interest rates are higher than first mortgages (8-18% p.a.) but lower than unsecured business loans, reflecting the property security.

Working capital injection for growth or seasonal needs. Business cash flow support during challenging periods. Property renovations or improvements. Business or personal investments. Debt consolidation. Bridging finance for time-sensitive opportunities. ATO debt resolution. Equipment purchases or inventory funding. Taking advantage of opportunities requiring quick capital access.

First mortgage lender won't extend further credit. You've maximised borrowing capacity on your first mortgage (servicing constraints). Existing lender's exposure is at capacity. You need short-term bridging finance. You want to maintain your existing first mortgage terms and rates. Quick access to funds is required (days vs weeks). You want to avoid the costs and complexity of refinancing.

Second mortgage applications are typically faster than first mortgages. Lenders focus on: property value and existing debt (to calculate available equity), exit strategy (how you'll repay), and purpose of funds. Documentation required: property valuation, first mortgage statement, income evidence, and business information. Settlement can occur in 3-10 business days with specialist lenders.

Priority: First mortgage is always paid in priority if the property is sold or you default. Deed of Priority: An agreement between first and second lenders stipulating their relationship and rights. Consent: Your first mortgagee may need to consent to the second mortgage—some first mortgages prohibit additional charges. Always get legal advice before proceeding.