Private first mortgage business loans are secured by a mortgage in first position on your property, issued by a lender outside the major banks. They either replace an existing bank loan or lend against a property that carries no mortgage, and they are built for business owners who need a decision on the property and the exit rather than a months-long credit review.
We help match you with a private lender for this structure. Property-secured funding commonly runs from $20,000 to $5,000,000, and the usual plan is to use the first mortgage as a stepping stone to longer-term finance.
What is a private first mortgage business loan?
A private first mortgage is a loan that ranks first on the title, so it is repaid before any other mortgage if the property is sold. Because the lender is in first position, it can often make more of the property’s equity available than a second lender could, and its security does not depend on anyone ahead of it.
The mortgage is recorded on the title when it is registered and cleared by a discharge when the loan is repaid. According to Land Use Victoria, the lender normally lodges that discharge after repayment, and the mortgage disappears from the title once the discharge is registered.
This is the page for refinancing out of a bank and for first-position equity release. If the bank loan is fine and you just need extra funds behind it, read second mortgages instead.
When does a first mortgage beat a second mortgage?
A first mortgage beats a second mortgage when the bank loan is the obstacle, or when there is no bank loan to sit behind. The comparison below shows where each structure fits.
| Situation | Better fit |
|---|---|
| Bank loan is fine, you need extra cash for a few months | Second mortgage |
| Bank loan is in arrears or default | First mortgage |
| Bank has declined to renew or extend | First mortgage |
| Property has no mortgage | First mortgage |
| Existing loan has a very low cost you want to keep | Second mortgage |
| You need the largest amount the equity supports | Often first mortgage |
If you are unsure, the private mortgage business funding overview compares every structure, and a lender can tell you after one look at the numbers.
How does a refinance out of the bank work?
A refinance out of the bank works by paying the bank its full payout figure at settlement and registering the new first mortgage in the same step. You do not stop paying one lender before starting with another, so the property is never left in limbo.
- Get the payout figure. Ask the bank for a payout letter that includes arrears, fees and any break costs.
- Lender reviews the equity and the exit. The lender sets the loan amount so the payout, costs and your cash requirement fit with room to spare.
- Documents and signing. Every owner signs, and company or trust details are confirmed.
- Settlement. On PEXA the money moves and the eligible documents are lodged with the land registry in one online step, and the platform notes that this part usually takes minutes once everyone is ready.
- Discharge and registration. The bank’s mortgage is discharged and the new first mortgage is registered.
The part that surprises people is the bank’s own paperwork. A bank can take several days to produce a payout letter and to process a discharge, so ask for the letter on day one. Also ask whether the loan has fixed-rate or other break costs, because those are added to the payout and change how much has to be borrowed.
If the property is in a company or trust name, have the structure documents to hand as well. The same people who signed the bank mortgage will sign the new one, so check that every signatory is still available and that the authority to sign is current.
Can you release equity with a first mortgage?
Yes. If the property has little or no debt, a first mortgage can release a large part of the equity for a business purpose. Examples include buying a business, funding stock for a seasonal peak, completing a property purchase or paying out a tax debt.
First position helps here because the lender does not have to guess what a bank ahead of it will do. That clarity can make the loan size easier to approve on a well-secured property. Even so, lenders keep a buffer, so you will not be offered every dollar of equity. A typical request is a modest slice of the equity, sized to the purpose, and the unused equity stays as protection for everyone involved. See business loans for tax debt for how the equity can clear an ATO liability.
Can a private first mortgage fix arrears or a default?
A private first mortgage can clear arrears or a default notice if the equity covers the bank payout, the costs and a sensible buffer. This is the most common reason for a first-position refinance, and the aim is to stop a default turning into a forced sale while you restructure.
What the lender wants to understand:
- The real payout figure, including arrears, fees and legal costs
- The timeline, meaning any dates in a default or demand notice
- Why the problem happened, in one honest paragraph
- The plan out, such as a sale, a settlement due to you or a refinance after trading recovers
Bank policy is a real constraint. A 2025 survey cited by the RBA found one in five SMEs struggling to obtain finance, and the central bank notes that non-bank lenders have gained share, particularly on smaller loans, since the start of 2022. A private first mortgage is the property-led alternative when a bank’s rules say no. For credit-history questions specifically, read bad credit business loans.
What does a lender look at on a first mortgage?
A lender looks at four things: the security, the equity, the exit and who is signing. Turnover and bank statements matter far less than they do with a bank, and cash-flow records may not be needed for the initial assessment.
| Area | What the lender wants to know |
|---|---|
| Security | Property type, location, title and whether it can be sold |
| Equity | The payout figure compared with the property’s estimated worth |
| Exit | How and when the loan is repaid |
| People | Who owns it, who signs, and how it is held |
Your own estimate of the property’s worth is a starting point, and the lender forms its own view of what the property would realistically sell for. A realistic estimate saves time.
What does a first mortgage cost, and how is interest handled?
A private first mortgage costs more than a bank loan, so it is for when speed or flexibility is worth it. Pricing is individual and depends on the property, the amount, the term and the exit. Interest can often be prepaid, or added to the loan balance, which means there may be no monthly repayment to manage while you fix the problem.
Because the cost is higher, the plan should always include the exit. Our guide to business loan exit strategy covers what a lender accepts and how to present it.
Illustrative example: a bank that will not renew
Illustrative example: a manufacturer owns a warehouse with an estimated worth of $2,200,000 and $900,000 owing to a bank that has decided not to renew its facility, giving 60 days to refinance. A longer-term lender will take four months to complete its own process. A private first mortgage of $1,000,000 pays out the bank, covers the interest in advance and settles in the third week. Four months later a longer-term loan settles, the private mortgage is discharged and the business has had no break in funding.
Start with one application
If the bank loan is the problem, the fastest step is to send the property and payout details through the quick application, which takes minutes. You will hear back on whether first position, a second mortgage or a caveat fits, with the numbers laid out. You can also begin your application here or call 03 4059 1829.