Private Mortgage Investing Australia: How It Works, Risks
Deal structure, security ranking and what the law actually gives a lender
Private mortgage investing means supplying capital to a loan secured by Australian real estate, either directly as mortgagee or through a mortgage scheme. This guide is about the direct-lender side: what you own, how the return is generated, how to read a deal, what your security can actually do, and what happens from settlement through repayment, extension, default or insolvency. It also shows where a pooled mortgage fund is legally and practically different.
Quick Answer
Private mortgage investing in Australia means providing capital for a loan secured by property, either by holding a mortgage directly or by investing through a mortgage scheme. A direct mortgage is generally a credit facility rather than a financial product; an interest in a pooled scheme is a financial product. Neither is protected by the Financial Claims Scheme, and a registered mortgage gives enforcement rights over the property; it does not guarantee repayment.
Also called: private mortgage investment, direct mortgage investment, direct mortgage lending, private mortgage lending.
| Where you are | The question you are really trying to answer | What matters next |
|---|---|---|
| Researching the idea | What am I actually investing in? | Start with how private mortgage investing works, then separate a direct mortgage from a pooled mortgage scheme. |
| Comparing offers | Is the quoted return worth the risk behind it? | Compare security position, combined LVR, valuation, borrower, term, exit, fees and concentration, not the rate in isolation. |
| A deal is in front of you | What do I need to verify before money moves? | Use the deal-sheet and due-diligence checks: title, prior debt, valuation, entity searches, documents and the repayment event. |
| About to settle | Will the security I was promised actually exist? | Confirm registration mechanics, prior-mortgagee cooperation where needed, executed documents, insurance and settlement instructions. |
| The loan is running | What should I watch before maturity? | Payment performance, insurance, covenant issues, changes in senior debt and evidence that the proposed exit is still progressing. |
| Maturity or extension | How does the principal come back, and what if the exit slips? | Read what happens at maturity, how a payout and discharge work, and what to revisit if an extension is requested. |
| Default or insolvency | What can the mortgage actually do for me now? | The answer moves to notice periods, power of sale, priority, enforcement costs and the insolvency regime. |
| The question | The short answer |
|---|---|
| What is private mortgage investing? | Providing capital for a property-secured loan, either directly as the mortgagee or indirectly through a mortgage scheme that holds loans for investors. |
| What do you own in a direct mortgage? | A debt owed under the loan documents and mortgage security over identified land. You do not become the owner of the property simply because you are the mortgagee. |
| How does the investor make money? | Direct lenders are paid under the loan terms, usually through interest and any amounts the documents validly allocate to them. Pooled investors receive distributions from the vehicle after its costs and fees. |
| What are the main risks? | Borrower default, an overstated or falling property value, lower priority than expected, high combined LVR, weak exit evidence, enforcement delay and cost, insolvency and concentration in one loan. |
| Can you get your money back early? | Not automatically. A direct mortgage has no bank-deposit-style withdrawal mechanism; an early exit depends on the documents and a workable transfer or repayment. A pooled fund follows its own redemption rules, which can be restricted. |
| Is a direct private mortgage a financial product? | Generally no. A mortgage securing obligations under a credit contract is a credit facility, and credit facilities are excluded from the definition of financial product. |
| Does that change if the money is pooled? | Yes, and completely. An interest in a managed investment scheme is a financial product in its own right, whether or not the scheme is registered. |
| Will your own name be registered on the mortgage? | Not necessarily. Depending on the structure, the registered mortgagee may be you, several contributing investors, a nominee or security trustee, or the responsible entity or its appointed asset holder. Check the title structure and the documents that say who can instruct, vary, extend and enforce the loan. |
| Is any of it government guaranteed? | No. The Financial Claims Scheme protects deposits with an authorised deposit-taking institution up to a cap. It does not extend to private mortgages or to mortgage schemes. |
| What is a caveat worth as security? | On its own, nothing. A caveat is a recording that restricts registration of dealings. The security behind it is an unregistered equitable mortgage, and realising that normally means going to court. |
| Does the PPSR cover land? | No. Land is expressly excluded from the definition of personal property in PPSA s 10 "Meaning of personal property", so a PPSR registration adds nothing to a mortgage over real property. |
| Who ranks first, the earlier loan or the earlier registration? | Registration. In New South Wales, Real Property Act 1900 s 36(9) gives priority by order of registration and not by the dates of the dealings, notwithstanding any notice. |
| How long before a mortgagee can sell? | A statutory notice period that varies by state. One month plus one month in Victoria, 30 days in Queensland which no agreement can shorten, one month after service in New South Wales. |
| What if the borrower goes into administration? | A statutory moratorium restricts enforcement. The exception for a secured party acting in the decision period only covers security over the whole or substantially the whole of the company's property, which one mortgage over one property generally is not. |
| Can a superannuation fund lend on a mortgage? | To an unrelated borrower, generally yes. To a member or a relative of a member, never, in any amount. |
| When do anti-money-laundering obligations bite? | Making a loan is a designated service only where the loan is made in the course of carrying on a loans business. Whether that describes you is a question about your own status, not about this deal. |
How does private mortgage investing work in Australia?
Private mortgage investing means putting capital into a loan secured by Australian real estate and being paid under the loan or investment terms while the capital is outstanding. In a direct deal, you are the lender or mortgagee for an identified loan. In a pooled mortgage scheme, you invest in the vehicle and the vehicle or its trustee holds and manages the underlying loans. Those two structures can look similar in a marketing pack and give you very different legal rights.
The direct version is easiest to understand as a sequence. A borrower needs capital. The lender assesses the borrower, property, security position and exit. The loan agreement creates the debt. The mortgage is registered against the land if the deal is proceeding on registered mortgage security. Interest is paid or accrued as the documents provide. At maturity the loan is repaid, the mortgage is discharged and the capital returns; if repayment fails, the lender moves into the default and enforcement process.
What do you own, and what do you not own?
You do not buy the property simply by becoming the mortgagee. The borrower remains the registered proprietor unless and until a lawful enforcement process produces a different outcome. What the lender holds is a debt plus the security rights created by the mortgage and the relevant state law. That distinction is why the form and ranking of the security matter more than the word "property-backed" on an investment summary.
| Stage | What happens | The investor question |
|---|---|---|
| The proposal | A proposed loan is presented with a borrower, amount, property, security position, term, pricing and proposed exit. | What am I being asked to fund, and why does the borrower need it? |
| Due diligence | The title, borrower and guarantor, valuation, existing debt, security position and exit are checked. | If the story is wrong, which document or register will reveal it? |
| Documents | The loan agreement creates the debt; the mortgage and any guarantees or priority arrangements create or support the security package. | Do the documents create the position the investment summary says I will hold? |
| Settlement and registration | Funds move and the mortgage dealing is lodged and registered through the applicable land-title process. | Will I actually be registered in the position I priced the deal on? |
| Loan term | Interest is paid or accrued as agreed while the borrower works toward the repayment event. | Is the original exit still real, and has anything changed ahead of my security? |
| Maturity | The borrower repays from sale, refinance or another evidenced source; the lender then executes the discharge. | Is the payout fully cleared before the security is released? |
| Default, if it occurs | The contractual and statutory default process replaces the expected repayment path. | What does my security let me do, how long will it take, and what ranks ahead of me? |
That lifecycle is the reason the page separates direct mortgages from mortgage schemes, deal assessment, maturity and default rather than treating "private mortgage investment" as one product with one risk profile.
How do private mortgage investors make money?
A direct private mortgage investor is paid under the loan terms, usually from interest on the money advanced; a pooled investor receives distributions from the investment vehicle after the vehicle's costs and fees. The important point is that the quoted rate is not the same thing as the quality of the investment. Two loans can quote the same return and expose the lender to very different security, valuation, borrower, term and exit risk.
For a direct lender, read the economics in the loan agreement rather than the headline on the deal sheet: when interest is due, whether it is paid or capitalised, which fees belong to the lender and which belong to the manager or other parties, what happens on early repayment, and what changes on default. For a pooled vehicle, read the offer document for the distribution policy, management and performance fees, liquidity rules and what the vehicle actually owns. The direct-versus-pooled section explains why those documents are not interchangeable.
| Factor | Why it changes the meaning of the quoted return |
|---|---|
| Security priority | A first mortgage and a second mortgage can carry the same stated rate while sitting in very different positions in the repayment waterfall. |
| Combined LVR | The relevant cushion for a junior lender is the property value after counting the debt that ranks ahead as well as the proposed loan. |
| Valuation | A ratio is only as reliable as the value, valuation date, assumptions and sale basis underneath it. |
| Borrower and guarantor | Security is the recovery path if repayment fails; it is not a substitute for understanding who is expected to repay in the ordinary course. |
| Exit | A contracted sale, an active refinance and a hope to refinance later are different repayment propositions. |
| Term and extension risk | A short stated term is only useful if the exit can occur inside it. An extension request can change the risk even when the security has not changed. |
| Interest treatment | Cash interest received during the term and interest capitalised into the debt have different cash-flow and recovery implications. |
| Fees and costs | Legal, manager, establishment, enforcement and fund-level costs can sit with different parties and can change the investor's actual outcome. |
| Concentration | One direct mortgage can expose the investor to one borrower, one property and one exit rather than a diversified pool. |
That is also why this guide does not publish a generic "market return" as though it described one asset. The useful comparison is the return against the risks in the next section and the evidence in the actual file.
Is private mortgage investing safe in Australia?
No property-backed private mortgage should be treated as automatically safe. A registered mortgage gives the lender enforceable security rights; it does not guarantee that the borrower will repay, that the property will sell for the valuation, that a junior lender will recover in full, or that enforcement will be quick or cheap. The risk is the combination of the borrower, property, valuation, priority, combined LVR, exit, documents and what happens if the expected repayment path fails.
| Risk | How it hurts the investor | What exposes it before settlement |
|---|---|---|
| Borrower default | Interest or principal is not paid when due and the file moves from repayment to enforcement. | Repayment capacity, borrower history, purpose of funds and the evidence behind the exit. |
| Property value risk | Sale proceeds can be lower than the value used when the loan was approved. | Valuation date, basis, assumptions, comparable evidence and whether the report can be relied on by the lender. |
| Priority risk | Debt and enforcement costs ahead of you are paid before your position receives anything. | Current title search, prior mortgage terms, priority arrangements and the registration position actually obtained. |
| Further-advance risk | A senior security can secure more debt than the junior lender assumed, reducing the equity cushion. | The prior mortgage terms, the amount it secures and documented dealings with the senior lender. |
| Exit risk | The refinance, sale or other repayment event does not happen when the term ends. | Evidence of the exit today rather than a general intention to refinance or sell later. |
| Enforcement risk | Statutory notice periods, legal work, possession, sale costs and disputes consume time and proceeds. | The state's enforcement rules, the loan documents and the practical condition and saleability of the security. |
| Insolvency risk | Administration, liquidation or bankruptcy can impose a different process and timetable on enforcement. | Entity and insolvency searches, borrower structure and the breadth of the security package. |
| Concentration risk | One failed loan can dominate the result where the investor is exposed to one borrower, property and exit. | The investor's exposure by borrower, property, security position, geography and repayment source. |
| Liquidity risk | The investor may not be able to convert the position back to cash before the loan or fund permits it. | Transfer and early-repayment terms for a direct loan; redemption and withdrawal rules for a pooled vehicle. |
For pooled private credit, Moneysmart's private credit guide tells investors to examine how loans are secured, where they sit in the capital structure, liquidity, fees and conflicts. ASIC said in June 2026 that tighter liquidity, borrower stress and credit deterioration were testing private-credit valuations, governance and investor disclosures. Those fund-level issues are not identical to a direct mortgage, but they point to the same underlying discipline: understand what the asset is, what ranks ahead of it, how it is valued and how cash gets back to you.
The direct-lender version of that discipline is the deal assessment below. The security comparison at what each form of security is worth then shows why "secured by property" is not enough information by itself.
Is a private mortgage a financial product in Australia?
In the ordinary case, no. A mortgage you hold directly over Australian land, securing obligations under a credit contract, is a credit facility, and a credit facility is not a financial product. That single characterisation decides most of what follows: what documents have to exist, who has to be licensed, where a dispute goes, and whether the words "wholesale" and "retail" mean anything on your file at all.
The exclusion sits in Corporations Act 2001 s 765A "Specific things that are not financial products", and the first thing to notice is that it does not define anything. Paragraph (1)(h) reads: "any of the following: (i) a credit facility within the meaning of the regulations (other than a margin lending facility)". The Act carves the thing out and then hands the definition to the regulations, which is why the useful text is somewhere most people never look.
That text is Corporations Regulations 2001 reg 7.1.06 "Specific things that are not financial products: credit facility". Subregulation (1) opens "For subparagraph 765A(1)(h)(i) of the Act, each of the following is a credit facility", and paragraph (f) covers the instrument you are holding: "a mortgage: (i) that secures obligations under a credit contract (other than a lien or charge arising by operation of any law or by custom)", followed by four exclusions that keep the paragraph from swallowing securities, scheme interests, life products and superannuation. Paragraph (a) covers the provision of credit itself. Paragraphs (g) and (h) pull in guarantees, so a guarantee taken alongside the mortgage sits in the same box rather than a different one.
One currency note, and it matters more than it looks. The compilation carrying this text is compilation 212, dated 21 April 2026, and its in-force period ended on 10 August 2026. A later version commenced on 11 August 2026 and the Register states that a compilation including those amendments has not been published yet. Nothing about the credit facility carve-out is known to have moved, but the wording quoted here is the last published text rather than the current one, and anyone relying on the precise words should check the Register once the new compilation lands.
Not a financial product is not the same as no consumer protection
Being outside the Chapter 7 definition removes the licensing, disclosure and dispute machinery that attaches to financial products. It does not put the arrangement outside law altogether, and three other perimeters are still live. The first is the credit perimeter, which turns on who the borrower is, what the money is for and whether a charge is made, and which is a question about your own conduct as a lender rather than about this loan. ASIC sets out its position in Regulatory Guide 203 "Do you need a credit licence?", and the licensing analysis belongs to the guide to becoming a private lender.
The second perimeter carries a qualification the ordinary summary omits: for the consumer-protection provisions of the ASIC Act, a credit facility is treated as a financial product under s 12BAA(7)(k), which is how the prohibitions on misleading and unconscionable conduct still reach a private mortgage that Chapter 7 does not. Being outside the licensing regime is not being outside conduct law. The third is unconscionability in equity and under statute, which no characterisation removes. In Stubbings v Jams 2 Pty Ltd [2022] HCA 6 the High Court described the interposition of a company borrower in an asset-based lending structure as commercially unnecessary and as a step calculated to prevent or impede scrutiny of the fairness of the transaction under the Code. A lender who structures a loan to look like something it is not can find the security set aside, whatever box the instrument sits in.
What flips the answer
Pool the money and you are no longer holding a mortgage at all. You are holding an interest in someone else's arrangement, and Corporations Act 2001 s 764A "Specific things that are financial products" makes a managed investment scheme interest a financial product on either footing: paragraph (1)(b) covers an interest in a registered scheme, and paragraph (1)(ba) covers an interest in a scheme that is not registered, other than one in relation to which none of paragraphs 601ED(1)(a), (b) and (c) are satisfied. The mortgages inside the vehicle may still be credit facilities. What you own is not those mortgages. What you own is the interest, and the interest is the product.
The regulator's own name for these pooled arrangements is mortgage schemes, and it is worth knowing because it is the term ASIC and Moneysmart use when they publish about the risks. If somebody has sent you an information memorandum for a "mortgage fund", a "mortgage trust" or a "syndicated mortgage", that is the category you are being offered and it is not the category this page is mostly about.
This is the fork every other question about pooled and direct lending hangs off, and it also determines which of the sibling guides is actually about your situation. The pooled structure, its fee layers and what a product disclosure statement does and does not tell you belong to the mortgage funds guide. The contributory variant, where you are matched to identified loans rather than to a pool, is set out in the contributory mortgage funds guide. Whether you personally clear the wholesale investor threshold is the subject of the wholesale investor certificate guide, and the broader picture all of these sit inside is mapped in the private credit funds guide.
| Comparison point | You hold the mortgage directly | You hold an interest in a pooled vehicle |
|---|---|---|
| What you own | A mortgage over identified land, in your name or your entity's name, recorded on that title. | An interest in a scheme. The mortgages are the scheme's assets, not yours. |
| How you are paid | Under the loan terms, usually from interest payable by the borrower and any amounts the documents allocate to the lender. | Through distributions from the vehicle after its costs, fees and the performance of the loans it holds. |
| How principal comes back | The borrower repays the loan from the stated exit; once cleared, the mortgage is discharged. | Through the vehicle's withdrawal, redemption or wind-up mechanics rather than a borrower paying you directly. |
| Can you exit early? | Not automatically. It depends on the documents and whether an early repayment or workable transfer of the lender's position can occur. | Only as the fund or scheme terms permit. Withdrawal windows can be limited, deferred or suspended where liquidity is insufficient. |
| Core documents you read | Loan agreement, mortgage, guarantees, valuation, searches and any priority or consent arrangements. | The offer document and scheme documents, plus any deal-specific material the structure provides to investors. |
| Financial product? | No, in the ordinary case. Credit facility, excluded by s 765A(1)(h)(i) and reg 7.1.06(1)(f). | Yes. An interest in a scheme is a financial product under s 764A(1)(b) or (ba). |
| Government guaranteed? | No. The Financial Claims Scheme does not reach it. | No. Same position, despite the word "fund" in most product names. |
| Who chooses the borrower | You do, on the file in front of you, and you carry the consequences of that choice alone. | The operator does, within whatever mandate the offer documents describe. |
| What you can see | Everything on the file, because it is your file. Title, valuation, the borrower's entity, the exit. | What the disclosure documents and periodic reporting choose to show you. |
| Concentration | One borrower, one property, one exit. There is no averaging. | Spread across whatever the vehicle holds, which is the structural point of it. |
| If it goes wrong | You are the mortgagee. The enforcement decisions, and their timing, are yours. | The operator enforces. Your position is a claim against the scheme, governed by its constitution. |
The borrower's side of the same transaction is a different document set with different protections. It is set out on the private lending page, and how the market on that side is structured is covered in the guide to private mortgage lenders.
Whose name is on the mortgage and who controls enforcement?
Do not assume that a "direct mortgage investment" automatically means your own name will appear on the property title. Depending on the structure, the registered mortgagee may be you or your entity, several investors contributing to the same loan, a nominee or security trustee acting for investors, or the responsible entity or an appointed asset holder for a managed investment scheme. The label on the offer is less important than two questions: who legally holds the mortgage, and who has authority to change or enforce the loan?
This is the missing middle between a one-lender direct mortgage and a fully pooled mortgage fund. Australian offers can give investors exposure to an identified mortgage while still using a scheme, sub-scheme, nominee or trustee structure. In a registered managed investment scheme, the responsible entity operates the scheme and Corporations Act 2001 s 601FC "Duties of responsible entity" provides that the responsible entity holds scheme property on trust for scheme members. The responsible entity may use an appointed asset holder, so seeing a mortgage in somebody else's name does not by itself tell you whether the structure is defective. It tells you to read the constitution, offer document and holding arrangements before assuming you personally control the security.
| Structure to identify | What may be registered | What the investor must establish |
|---|---|---|
| Single direct lender | The investor, company, trust trustee or SMSF trustee that made the loan may be the registered mortgagee. | That the lending entity named in the loan documents is the entity registered as mortgagee, and whether a manager has delegated authority to act for it. |
| Several investors in one identified loan | The investors may be recorded together, or the security may be held through a nominee, trustee or scheme structure. | How each investor's economic interest is recorded, who can give instructions, what consent threshold applies, and what happens if investors disagree about an extension or enforcement. |
| Deal-specific scheme or sub-scheme | The security may be scheme property rather than an asset registered personally to each investor. | Whether the investor owns a scheme interest rather than the mortgage itself, which entity holds the mortgage, and which constitution or deed governs distributions and enforcement decisions. |
| Pooled mortgage fund | The fund or its responsible entity, trustee, custodian or appointed holder controls the mortgages held for the vehicle. | That their asset is an interest in the vehicle, not a particular mortgage, and that redemption, valuation, conflicts and enforcement are governed by the fund documents rather than individual lender instructions. |
Five questions to answer before money moves
- Whose exact legal name will appear as mortgagee or security holder? Do not accept "investors are secured" as the answer.
- What do you personally own? A mortgage and debt, a beneficial interest under a trust or nominee arrangement, or units or interests in a scheme are different legal positions.
- Who can vary the loan? Establish who can approve an extension, waive a breach, capitalise interest, release collateral or consent to changes in senior debt.
- Who decides whether to enforce? If several investors are involved, the documents should say whether the manager, trustee, responsible entity or a defined investor majority controls that decision.
- What happens if the manager or operator itself fails? The security-holding and replacement mechanism should be understandable without assuming the same company remains in business for the life of the loan.
For a registered scheme, ASIC's Professional Registers Search can be used to check the registered scheme and relevant AFS licence details. ASIC's current Regulatory Guide 45 "Mortgage schemes: Improving disclosure for retail investors" is also useful for understanding the disclosure questions ASIC expects retail mortgage-scheme investors to be able to assess. A licence or registration is a perimeter check, not proof that the underlying mortgage is a good investment.
What security can a private mortgage investor hold?
A private mortgage investor can hold a registered first mortgage, registered second mortgage, unregistered or equitable mortgage, or other supporting security; a caveat protects a claimed interest but is not itself the mortgage, and the PPSR does not create security over land. The useful comparison is not the label but the remedy: what appears on the title, what ranks ahead of you and what the position lets you do if the borrower defaults.
A registered first mortgage
A registered mortgage recorded on the title, first in the order of registration, carrying the statutory machinery of the relevant state. That machinery is what turns a document into a remedy, and the periods it imposes are set out in the table below. Nothing else on this list gives you a power of sale you can exercise yourself.
A registered second mortgage
The same machinery, one place further down, behind whoever holds the first mortgage. You are not a weaker kind of mortgagee; you are the same kind of mortgagee whose money arrives after somebody else's. That distinction is the whole of who gets paid first. Getting registered in that position is a separate problem, and it has its own section at how a second mortgage gets registered.
An unregistered or equitable mortgage
A real security, created by the loan documents, that nobody looking at the register will see. It survives against the borrower and it can be enforced, but the ordinary route to realising it is an application to a court rather than a notice served by you. The gap between "I have security" and "I can sell" is at its widest here.
A caveat
A caveat is not a security and does not become one by being lodged. It is a recording that restricts the registration of dealings, and only dealings that would affect the interest the caveat claims. What sits behind it is the unregistered equitable mortgage described above, and the caveat's job is to stop the title moving while you deal with that. It is also the form most exposed to being brought to an end by someone else. In Western Australia, Transfer of Land Act 1893 s 138B "Lapsing of caveat" lets the registered proprietor, or a judgment creditor under a registered property seizure and sale order, ask the Registrar to serve a notice, after which the caveat lapses 21 days later unless the caveator has both obtained a Supreme Court order extending it and lodged a copy of that order. Two steps, one clock, and the clock does not stop because the first step is under way. That lapsing procedure applies only to caveats lodged under s 138A, not to every caveat, which is a distinction routinely lost in general commentary.
A PPSR registration
Over land, it is worth nothing, because land is not personal property. Personal Property Securities Act 2009 s 10 "Meaning of personal property" defines personal property as "property (including a licence) other than: (a) land", and the register's own guidance says the same in plainer words: personal property "doesn't include land or fixtures". A PPSR registration still has work to do where the deal has a personal property leg, such as plant, receivables or a general security over the borrowing entity. It adds nothing to the mortgage over the land itself.
| What you are holding | What appears on the title | What it lets you do on default |
|---|---|---|
| Registered first mortgage | A registered mortgage, first in the order of registration. | Serve the statutory default notice, then sell under the statutory power once the period has run. See the notice periods by state below. |
| Registered second mortgage | A registered mortgage, second in the order of registration. | The same statutory power, exercised over an asset that has to clear the first mortgage before it reaches you. |
| Unregistered or equitable mortgage | Nothing, unless a caveat is lodged to protect it. | Enforce against the borrower, but expect to ask a court for the sale rather than to conduct it yourself. |
| Caveat | A caveat, which restricts dealings affecting the claimed interest. | Nothing on its own. It preserves a position; it does not realise one. In WA it lapses 21 days after a notice served at the proprietor's request, for s 138A caveats only. |
| PPSR registration over land | Nothing. Land is outside the register. | Nothing. PPSA s 10 excludes land from personal property. Uniform across Australia. |
| State | Default must continue for | Then, after the notice is served | Can the mortgage vary it | Provision |
|---|---|---|---|---|
| Victoria | One month, or such other period as the mortgage expressly fixes. | One month after service, or such other period as the mortgage fixes, before sale. | Yes, both periods. | Transfer of Land Act 1958 s 76 and s 77 "Powers of mortgagee or annuitant on default" |
| New South Wales | Default in payment or in observance of a covenant, as defined in the section. | One month after service of the notice, or some other period exceeding one month limited by the mortgage. | Lengthen only. Any substitute period must exceed one month, and the duty on sale cannot be contracted out of at all. | Real Property Act 1900 s 57 "Procedure on default", with proceeds under s 58 |
| Queensland | No separate pre-notice period. The notice states the default and requires it to be remedied. | 30 days after the notice is given to the mortgagor. | No. The section applies despite any agreement to the contrary. | Property Law Act 2023 s 114 "Restriction on exercise of power of sale" |
| Western Australia | Per s 106, which sets the default and the notice requirement. | Per s 108, which refers back to "such default" and "such notice" and does not stand alone. | Per the mortgage. | Transfer of Land Act 1893 ss 106 and 108, read together |
Two things about that table are worth holding onto. Queensland is the strictest and the most recently rewritten: the Property Law Act 2023 commenced on 1 August 2025 and replaced the 1974 Act, so any commentary citing the Property Law Act 1974 for Queensland power of sale is now out of date. And in Victoria the two periods run consecutively rather than together, which is the single most common mistake made by lenders enforcing their first loan.
Security that is worth what you think it is worth
- Registered, and you have seen the registered instrument rather than a promise that it will be lodged.
- The registered proprietor on the title is the entity that signed the mortgage.
- Your position in the order of registration is the one your file assumes it is.
- Any prior mortgagee's cooperation is documented, not anticipated.
- The exit is an event that can be evidenced now, not a market condition hoped for later.
Security that quietly is not
- A caveat treated on the file as though it were a mortgage.
- Cooperation from a prior mortgagee that was assumed, or given verbally, and never produced.
- A PPSR registration standing in for a mortgage over land.
- A guarantor whose own position was never searched.
- An exit that depends on refinancing by a lender nobody has spoken to.
None of this decides whether a lender is permitted to take a particular form of security in the first place, which is a licensing and conduct question and belongs to what a lender is licensed and permitted to do. For the borrower's view of granting a second mortgage over property they already own, see the second mortgage guide; for the mechanics and lapsing rules of caveats as a borrowing structure, see the caveat loans guide.
Who gets paid first on a mortgage in Australia?
A mortgage registered first generally ranks ahead of later registered mortgages, so the registration position matters more than the date the money was advanced. In New South Wales that rule is written down expressly. Real Property Act 1900 s 36 "Instruments to be registered in order of lodgment", subsection (9), provides:
"Dealings registered with respect to, or affecting the same estate or interest shall, notwithstanding any notice (whether express, implied or constructive), be entitled in priority the one over the other according to the order of registration thereof and not according to the dates of the dealings."
Read the two exclusions in that sentence carefully, because between them they dispose of most of what people assume. Priority does not follow the dates of the dealings, so lending first buys you nothing. And it operates "notwithstanding any notice", so knowing about the other mortgage, or the other mortgagee knowing about yours, changes nothing either. The order in which the Registrar-General recorded the dealings is the answer, and it is the whole answer.
The corollary is the part that costs money. If your dealing is sitting in a solicitor's office in registrable form while somebody else's is being recorded, you are second, whatever the file says about who advanced when. Registration is not a formality that follows settlement; on a competitive title it is the event that determines the value of everything else you did.
Where the money actually goes
Priority is abstract until a property sells, at which point it becomes a distribution sequence with your name at a particular point in it. Victoria sets that sequence out in Transfer of Land Act 1958 s 77 "Powers of mortgagee or annuitant on default", subsection (3), and it is the clearest statutory statement of the waterfall in the country.
| Order | What is paid | What it means for you |
|---|---|---|
| Firstly | "all costs charges and expenses properly incurred incidental to the sale and consequent on such default". | The cost of enforcing comes out of the proceeds before any lender is paid, including the second lender who did not choose to enforce. |
| Secondly | "the moneys which are due or owing on the mortgage or charge". | The selling mortgagee's debt. If that is the first mortgage, it clears in full before anything reaches you. |
| Thirdly | "moneys owing under or in respect of subsequent mortgages and charges in the order of their respective priorities". | Where a second mortgage or third mortgage sits. The order among you is your registration order, restated. |
| Fourthly | "the residue (if any) to the mortgagor", or into court, or into a joint account where an annuity is involved. | Anything left goes back to the borrower. There is no discretion to redirect it. |
Two features of that sequence are worth holding onto. Enforcement costs sit above every lender, so a slow or contested sale erodes the junior positions first and the senior position not at all. And the third step ranks subsequent mortgagees "in the order of their respective priorities", which sends you straight back to s 36(9) and its equivalents. The waterfall does not create a ranking. It pays out one that already exists.
The duty the selling lender owes, and what it is worth to you
A mortgagee exercising power of sale is not free to sell at any price that clears its own debt, and this is the junior lender's only real protection in the sequence above. In New South Wales, Conveyancing Act 1919 s 111A "Duties of mortgagees and chargees in respect of sale price of land" requires a mortgagee exercising a power of sale to "take reasonable care to ensure that the land is sold for" not less than market value where there is an ascertainable market value, and otherwise "the best price that may reasonably be obtained in the circumstances". The section applies despite any stipulation to the contrary, and it settles the remedy: the purchaser's title cannot be challenged, but a person who suffers loss from the breach has a claim in damages. Note that this duty lives in the Conveyancing Act, not the Real Property Act, which is a citation people get wrong routinely.
Queensland states the same idea as a positive duty with a penalty attached. Property Law Act 2023 s 116 "Duty of mortgagee as to sale price", subsection (2), requires the mortgagee to "take reasonable care to ensure the property is sold at the market value of the property", and subsection (5) applies the section "despite any agreement to the contrary". Where the mortgage is a prescribed mortgage, subsection (3) adds specific obligations to advertise, obtain reliable evidence of value, maintain the property and sell by auction unless another method is appropriate, carrying a maximum penalty of 20 penalty units where the contravention relates only to the catch-all paragraph and 200 penalty units otherwise. That penalty attaches to the subsection (3) obligations rather than to the general duty in subsection (2), a distinction easily lost when the section is summarised. Subsection (4) separately requires notice to the mortgagor about the sale within 28 days after it.
The four provisions that decide your position
- s 36(9)Priority by order of registration, not by the dates of the dealings, and notwithstanding any notice. Real Property Act 1900 (NSW), as at August 2026, read 15 August 2026.
- s 56A"Postponement of mortgages", by registered memorandum. An intervening registered mortgagee must join in. Real Property Act 1900 (NSW), as at August 2026, read 15 August 2026.
- s 61"Voluntary subordination of security interests", effective according to its terms between the parties. Personal Property Securities Act 2009 (Cth), as at August 2026, read 15 August 2026.
- s 10"Meaning of personal property": property other than land, which is why s 61 cannot reach a mortgage over real property. Personal Property Securities Act 2009 (Cth), as at August 2026, read 15 August 2026.
General information only, and not financial advice. Provisions are cited as at the dates shown. New South Wales is used as the worked example because it states the priority rule expressly; other states reach the same destination by their own sections. Nothing here is a substitute for advice on your own title.
What happens if the first lender advances more money?
A further advance under an all-monies first mortgage can rank ahead of your second mortgage and dilute you, without any dealing being registered in between. Order of registration settles which dealing ranks ahead of which. It does not settle how much the prior dealing secures, and that is the gap most second mortgagees never look at.
New South Wales has no statutory tacking provision for Torrens land. The question is left to the general law, where the orthodox position is that a prior mortgagee cannot tack a further advance so as to defeat an intervening security of which it had actual notice. Which produces the tension worth naming plainly: s 36(9) settles priority "notwithstanding any notice", while the common law rule that limits further advances turns on precisely that notice. The two rules answer different questions, and reading either one as though it answered both is the most expensive mistake available in this part of the law.
What closes the gap in practice is unglamorous: formal notice to the prior mortgagee, and a documented record of what the prior mortgage is permitted to secure. Both are file items rather than legal arguments, and both are cheap on the day and unrecoverable afterwards.
Reordering priority on purpose
Priority is not immovable, and New South Wales provides a registered mechanism for moving it. Real Property Act 1900 s 56A "Postponement of mortgages" allows a mortgage that "for the time being has priority" to be postponed to another "by a memorandum in the approved form registered under this Act". Two subsections do the real work. Subsection (2) provides that the memorandum cannot be registered where a registered mortgage intervenes between the mortgage being postponed and the one gaining the benefit, unless the intervening mortgagee joins in. And subsection (4) provides that after registration the mortgages rank "as if they had been registered in the order in which by the memorandum they are expressed to have priority".
So a reordering that ignores a party in the middle simply does not register, and the reordering only takes effect on registration. An agreement in a drawer changes nothing about the register. Where the arrangement is documented as a deed of priority between lenders rather than as a registered memorandum, it binds the lenders who signed it as a contract, and it is worth being precise on your own file about which of those two things you actually have.
The contrast with personal property is instructive. Personal Property Securities Act 2009 s 61 "Voluntary subordination of security interests" provides that a secured party "may (in a security agreement or otherwise) subordinate the secured party's security interest in collateral to any other interest in the collateral", and that the subordination "is effective according to its terms between the parties" and "may be enforced by a third party if the third party is the person, or one of a class of persons, for whose benefit the subordination is intended". Clean, statutory, and unavailable to you, because s 10 puts land outside personal property altogether. For land, the mechanism is the state land title statute or nothing.
How does a second mortgage get registered behind a first?
A second mortgage is registered through the relevant electronic conveyancing process, and the party controlling the title usually has to make the title available for the dealing. Where a bank holds the first registered mortgage, its cooperation can therefore be the practical gating step even where first-mortgagee consent is not itself a statutory condition of registration.
Paper certificates of title are gone in the states that have completed the move to electronic conveyancing. What replaced the physical document is a record of who controls the right to deal with the title, and a process inside the electronic workspace by which that party nominates the title into the transaction so the new dealing can be lodged. The registries' own names for these steps are control of the right to deal and title nomination, and they are the terms to use when asking a first mortgagee where your dealing is up to. Where a bank holds the first mortgage, the bank is usually that party. It follows that a second mortgage cannot simply be lodged around them.
Two consequences follow, and they point in opposite directions, which is why this is worth stating carefully rather than as a slogan.
The first is that formal first mortgagee consent, in the sense of a legal precondition to registration, is not what most people think it is. In several jurisdictions the first mortgagee's consent is not a statutory requirement for registering a subsequent mortgage. What the first mortgagee holds is control of the practical step that makes registration possible.
The second is that the practical step is enough. A first mortgagee who will not nominate the title, or who will only do so once a deed of priority is signed on its terms, is not exercising a legal veto and does not need one. The outcome for you is identical either way, and the timetable turns on their commercial appetite, not on a form. In Victoria the statutory root of this gatekeeping role is Transfer of Land Act 1958 s 86 "First mortgagee to produce certificate of title for registration of subsequent instrument", which obliges the first mortgagee, on request and at the requester's cost, to produce the certificate of title so the subsequent instrument can be registered, or to give the Registrar an administrative notice where no certificate exists. The section is expressed in the vocabulary of paper. The obligation it creates is the reason the electronic equivalent happens at all.
The gap between signing and registration
There is a window between the moment your documents are signed and the moment your mortgage is recorded, and section three explains why that window is where priority is won and lost. Queensland provides a specific instrument for it. Land Title Act 1994 s 140 "Deposit of priority notice" allows a priority notice to be deposited over a lot, which prevents other dealings being registered ahead of the identified instruments for a limited period. It is not available everywhere and it is not a substitute for prompt lodgement, but on a Queensland file where settlement and lodgement are not simultaneous it is the tool that closes the gap.
Verify the mechanism in the state you are lending in before you rely on it. The land registries publish their own operating requirements, and they are the authority on the process even where the statute is the authority on the right.
How do you assess a private mortgage investment before you lend?
Assess seven things before money moves: what you own, the security position, combined LVR, valuation, borrower and guarantor, repayment exit, and the documents that make the promised security real. Then verify the story against the title, ASIC company register, PPSR, ABN Lookup and National Personal Insolvency Index rather than treating the investment summary as the source of truth.
| Deal-sheet item | What it should tell you | The question to ask |
|---|---|---|
| Loan amount | The debt being advanced and, separately, the amount the borrower actually receives after deductions. | Which figure does the loan agreement say is owing, and what is deducted at settlement? |
| Security position | First, second, unregistered or another stated position over identified property. | Does a current title search show the same position the summary assumes? |
| Property value | The value used to size the loan and the date and basis on which it was assessed. | Who prepared the valuation, who may rely on it, and what sale assumptions sit behind it? |
| Combined LVR | For a junior position, the debt ranking ahead plus the proposed loan relative to the property value. | Is the ratio using all senior debt actually secured, or only the balance someone put in the summary? |
| Borrower and guarantor | The exact legal entities and people expected to repay or support the debt. | Do the company, ABN, PPSR and insolvency searches match the people and entities in the documents? |
| Purpose of funds | Why the borrower needs the capital and what it will be used for. | Does the purpose make commercial sense, and is it consistent across the application and legal documents? |
| Term and maturity | The date the principal is due back rather than simply the expected duration. | What event is supposed to occur before that date to create the repayment money? |
| Interest and payment terms | When interest is due, whether it is paid or capitalised, and what changes after default. | What cash is actually expected during the term, and what merely increases the debt? |
| Exit | Sale, refinance, asset realisation or another specific repayment source. | What evidence exists today that the exit can happen, rather than just a statement that it will? |
| Prior lender arrangements | Any consent, nomination, priority deed, cap or other requirement affecting a junior mortgage. | What can the senior lender do that could change the amount ranking ahead of me? |
| Insurance | Whether the secured property is insured and the mortgagee's interest is noted where appropriate. | Is the evidence current and does it match the property and mortgagee in this file? |
The title search
Everything else is commentary on this, because the title is where your security either exists or does not. It tells you who the registered proprietor is, what is already registered against the land, what caveats are sitting on it, and where a new mortgage would fall in the order of registration. The two mismatches to look for are the proprietor not being the entity that is signing your mortgage, and a prior dealing that your file has been treating as historical.
The company search
Where the borrower or guarantor is a company, ASIC's company register gives you the current officeholders, the registered office and the company's status. A clean search tells you the entity exists and who is behind it today. It does not tell you what those people have done before, which is a separate set of registers dealt with under how to check the person asking you to lend.
The PPSR search
A grantor search surfaces what an asset search does not. It will not tell you anything about the land, for the reason given under what each form of security is worth, but it will tell you what else is encumbered in the borrowing entity, and a borrower whose plant and receivables are already fully secured is a different borrower from the one your file describes. The register's own description is the plainest statement of what it does and does not cover.
ABN Lookup
ABN Lookup confirms the entity type, its ABN status and its goods and services tax registration, and is free. The limitation to understand is specific: where the borrower is a trust, there is no trustee field. The entity name is often the uninformative "The Trustee for the X Trust", and the trustee is identifiable only where the registered entity, business or trading name happens to contain it. If your security is being given by a trustee, the trust deed is the document that answers the question, not the register.
The personal insolvency index
The National Personal Insolvency Index, run by AFSA, records personal insolvency proceedings from August 1928. AFSA's own wording is careful and should be read the way it is written: the index is a record of "some personal insolvency proceedings in Australia", not all of them. Each search costs $15, as at August 2026. For a guarantor whose personal covenant is doing real work on your file, that is the cheapest thing on this list relative to what it can surface.
The valuation, and who is entitled to rely on it
A valuation addressed to somebody else is a document you have read, not a document you can rely on. The two questions to settle before the report matters are who the report is addressed to and on what basis of value it was prepared, because a market value assessed on an ordinary marketing period and a value assessed on a constrained sale are different numbers describing the same building, and the second one is the one that governs if you ever enforce. Where the deal is being sized against a ratio, the loan to value ratio is only as good as the valuation basis underneath it.
The exit
Every loan made by a private mortgage lender is repaid by an event, and the file either identifies that event or it does not. A sale that is already under contract, a refinance for which an application has actually been lodged, and a general intention to refinance later are three different positions, and only the first two can be evidenced today.
From the broker's desk
Four patterns from working these files from both sides of the table, offered as observations rather than as rules, and deliberately without figures:
- Files rarely fall over on the borrower. They fall over at the security stage. The credit assessment is usually the part everyone has done carefully. The part that unravels is the registration position, and it unravels because someone assumed a nomination, a discharge or a lodgement rather than holding the document.
- The document nobody reads until it matters is the one that says what the prior mortgage secures. On a file with someone registered ahead of you, that wording decides whether your position can quietly change without any dealing being registered in between, and it is far easier to obtain before settlement than after a default.
- The search that finds the problem is rarely the search the file was worried about. The register everyone runs is the one the deal is obviously about. The one that changes the answer is usually the entity or personal search that nobody thought was relevant to a property loan.
- Holding a registered first mortgage and holding a caveat feel identical right up until the borrower stops answering the phone. After that they diverge completely, and the difference is not one of degree. One position has a notice period and a power; the other has a court list.
General observations about deal patterns, not advice, not an assessment of any file, and not a statement about any particular lender or arrangement. Every matter turns on its own documents.
How do you verify a private mortgage manager, broker or investment operator?
Verify the operator and the deal separately: search the live public registers rather than relying on certificates, screenshots or a professionally produced investment pack. The question is not only whether the company exists; it is whether the people, licences or memberships that should exist for the structure are current, and whether the complaint route you think you have is actually available.
| What to verify | Where to check | What the check can tell you |
|---|---|---|
| AFS, credit and representative status | ASIC Professional Registers Search | Whether a person or organisation appears on the relevant register, its status, licence or registration number and conditions. ASIC says the search also covers registered managed investment schemes. |
| Banned or disqualified people | ASIC banned and disqualified registers | Whether a person or organisation has been banned or disqualified from specified corporate or financial roles. |
| The company and current officeholders | ASIC company register and paid extracts where needed | Whether the entity exists, its status and current recorded officeholders. A company search is an identity check, not a credit assessment. |
| External dispute resolution | AFCA financial firm search, where the firm says AFCA membership applies | Whether the financial firm is currently listed for the relevant dispute-resolution scheme rather than merely showing you an old certificate. |
| Borrower and guarantor encumbrances | PPSR, title register and entity searches | What secured interests exist over relevant personal property and what is registered against the land. The PPSR does not cover land itself. |
| Personal insolvency | AFSA National Personal Insolvency Index | Recorded personal insolvency proceedings for an individual borrower or guarantor. |
For AFS licensees, ASIC now also publishes website addresses supplied by licensees in the Professional Registers Search to help investors distinguish genuine financial-services websites from impersonators. Treat that as an identity check, not an endorsement: ASIC itself says holding an AFS licence does not guarantee the quality or probity of a licensee's services.
Whether a licence is required at all
That depends on what is being offered to you, which is the fork set out under whether a private mortgage is a financial product. If you are being offered an interest in a scheme, that is a financial product and the person dealing in it is in licensed territory, so an Australian financial services licence should exist and should be searchable. If you are lending directly on your own mortgage, the person arranging it may sit outside the financial services regime entirely. That is not a red flag by itself, but it changes where a complaint can go, which is the next point and the more consequential one.
The dispute resolution position, which is the one that matters
Membership of the external dispute resolution scheme is not universal in this market, and establishing it before you advance is the single most useful thing on this list. Check the scheme's own financial firm register rather than accepting a membership certificate, because certificates are no longer being issued and the register is now the only verification route. Where the firm is a member, the scheme can consider a complaint and award compensation up to published caps. Where it is not, your only forum is a court, and the cost of that forum is usually a large fraction of a small loan.
The people, not just the entity
A clean company search tells you the entity is registered. It does not tell you whether the people behind it have been banned or disqualified from providing financial services or from managing corporations, or whether the regulator has taken action against a predecessor entity. Those are separate public registers, and they are the ones that surface a history the entity search will not. Search the individuals, not only the company name on the letterhead.
What the paperwork tells you about which regime you are in
If you are being asked to sign a wholesale or sophisticated investor declaration in order to see the deal, that is a gate with legal consequences, and what you give up by signing it is dealt with in the wholesale investor certificate guide. If you are being shown an information memorandum rather than a product disclosure statement, that is a signal about which regime you are in rather than a formality. And if the arrangement is described to you as a fund but the money is going into a single loan, the two descriptions cannot both be right.
What documents are in a private mortgage loan file?
Eight documents: the loan agreement, the mortgage instrument, any guarantee, a priority or consent deed, the valuation, evidence of insurance with the mortgagee noted, the searches, and the borrower's business purpose declaration. The loan agreement creates the debt and sets its terms. The mortgage instrument creates the security over the land and is the thing that gets registered. Confusing them is the origin of a surprising share of disputes, because a loan agreement that recites security is not security, and a registered mortgage does not by itself tell you what is owed.
The mortgage manager
On most direct private mortgages the day-to-day file is run by a mortgage manager rather than by the lender. The manager prepares and issues the documents, coordinates settlement, collects payments and manages the early stages of arrears. The lender remains the mortgagee. What the manager can decide alone, what requires the lender's instruction, and who holds the original instruments are questions worth answering in writing at the start rather than discovering during a default.
Who pays
Legal costs, valuation, search fees, registration fees and the manager's establishment work all fall somewhere, and on private mortgages they are typically borne by the borrower and deducted at settlement. The point for the lender is not the amount. It is that the deduction happens at settlement, so the sum advanced and the sum the borrower receives are different, and the loan agreement has to say which of the two the debt is measured against.
Settlement
Most mortgages now settle electronically, which means the settlement is constrained by the platform's operating hours as well as by the parties. PEXA publishes its settlement windows by state, and they are not uniform: on the page as accessed on 15 August 2026, financial settlement in Victoria, New South Wales and Tasmania runs to the later afternoon, Queensland and the Northern Territory close earlier, and Western Australia's window closes earliest on the local clock. PEXA publishes those as local times, so a national timetable has to be converted before it means anything. Lodgement hours are a separate set of times again. PEXA does not publish an "as at" date on that page, so it is cited here as accessed rather than as published, and it should be re-checked rather than remembered.
The practical consequence is that a settlement scheduled late in the day in a state with an early close is not a scheduling preference, it is a risk, and the party carrying that risk is usually the one whose money is moving.
What AML checks apply when you settle a private mortgage?
The AML/CTF lending trigger applies where a loan is made in the course of carrying on a loans business. The threshold sits in one line of a table, and it is narrower than most summaries suggest. Anti-Money Laundering and Counter-Terrorism Financing Act 2006 s 6 "Designated services", table 1, item 6 describes the designated service as "making a loan, where the loan is made in the course of carrying on a loans business", and names the customer as "the borrower". Item 7 carries the same qualifier for allowing a borrower to conduct a transaction in relation to a loan.
So the operative words are "in the course of carrying on a loans business", and the Act does not tell you what that means. The dictionary in s 5 defines "loan". It does not define "loans business". The phrase appears in the Act in items 6 and 7 of that table and nowhere else that could be read, and no definition attaches to it. Whether your lending is a loans business is therefore a characterisation question about your own conduct, judged on ordinary principles about carrying on a business, and it is not answered by the size of any single deal.
Whether that means you have to enrol is not a question this page answers. Enrolment, registration and what an ongoing compliance program has to contain are questions about your status as a lender, and they belong to the guide to becoming a private lender. What belongs here is narrower and more immediately useful: what the obligation does to this deal and this file.
What it does to the file
Where the regime does apply, the identification work is done before the designated service is provided, which on a mortgage advance means before settlement rather than after it. That has a scheduling consequence that catches people once: an entity borrower with a corporate trustee and beneficial owners behind it is not a same-day identification exercise, and a settlement date set on the assumption that it is will move. The records then have to be kept, and the retention obligation outlives the loan by a margin that surprises lenders who close a file when the discharge registers.
The two dates that get collapsed into one
Two dates are in play and they do different jobs. The commencement table in s 2 of the Anti-Money Laundering and Counter-Terrorism Financing Amendment Act 2024 commences Schedules 1, 2 and 3 on 31 March 2026, along with Schedules 8 and 10 and most of Schedules 5 and 6. Schedule 4, on legal professional privilege, and Schedule 7, on the definition of bearer negotiable instrument, commence on 1 July 2026. But Schedule 3 also carries its own Part 4, which delays the application of the program, customer due diligence, reporting and record-keeping obligations for the newly captured sectors until 1 July 2026, with an enrolment date after that. So the provisions commenced in March and the obligations began to bite for those sectors in July, and collapsing the two into a single date is what produces the confusion.
The anti-money-laundering position, in four numbers
- item 6The designated service is "making a loan, where the loan is made in the course of carrying on a loans business". AML/CTF Act 2006 s 6 "Designated services", table 1, as at August 2026, read 15 August 2026.
- noneStatutory definitions of "loans business". The dictionary in s 5 defines "loan" and stops there. AML/CTF Act 2006 s 5 "Definitions", as at August 2026, read 15 August 2026.
- 31 Mar2026. Commencement of Schedules 1, 2 and 3 of the 2024 Amendment Act, which is the reform usually called tranche 2. Amendment Act 2024 s 2 commencement table, as at August 2026, read 15 August 2026.
- 1 Jul2026. Commencement of Schedules 4 and 7, and separately the date to which Schedule 3 Part 4 delays the new obligations for the newly captured sectors. Amendment Act 2024 s 2 and Sch 3 Pt 4, as at August 2026, read 15 August 2026.
General information only, and not financial advice. Commencement dates are the dates provisions came into operation. They are not the same as the date a particular obligation begins to apply to a particular entity, which the transitional rules deal with separately. Read against your own circumstances with advice.
What happens at maturity and how do you get your money back?
In six steps: the payout figure is issued, checked against the loan agreement, funds clear, the discharge is executed and lodged, the registry records it, and the records are retained after the file closes. Each step depends on the one before it being complete rather than merely under way.
- The payout figure is requested and issued. Someone acting for the borrower, or the incoming lender on a refinance, asks for the amount required to discharge. The figure is calculated to a specific date and it expires, which is why a payout obtained early and settled late is a common cause of a shortfall on the day.
- The figure is checked against the loan agreement. Anything capitalised, any default amounts and any costs recoverable under the mortgage either appear in the payout or are given up. This is the last moment at which the debt can be stated.
- Funds are received and confirmed as cleared. Confirmed, not scheduled. Nothing below this line should happen against an expectation.
- The discharge of mortgage is executed and lodged. The lender signs, and the instrument goes to the land registry, generally through the same electronic workspace the loan settled in and inside the lodgement hours published for that state.
- The registry records the discharge. Only at this point does the mortgage come off the title. Between lodgement and recording the register still shows your mortgage, which matters if anyone is searching the title in that window.
- The file closes, and the records do not. Retention obligations continue after the security is discharged, and a lender who treats discharge as the end of the file will find the records gone before the obligation to hold them has expired.
Can the investor get out before maturity?
Not automatically. A direct mortgage is a private debt and security position, not an at-call deposit. An early exit depends on the loan documents, whether the borrower repays early or another party can lawfully take the lender's position, and what consents, transfer documents or registrations are required. In a pooled vehicle, withdrawal is governed by the scheme's redemption rules and available liquidity, so a stated withdrawal facility should never be read as the same thing as cash on demand. The difference between the two structures starts at direct mortgage versus mortgage scheme.
What if the borrower asks for an extension?
An extension request is a new decision about an old security, not merely a new date on the calendar. The questions to revisit are what changed since settlement: the current title and senior debt, the condition and value of the property where the earlier valuation may no longer be enough, accrued or capitalised interest, insurance, borrower status and evidence for the revised exit. A borrower can need more time for an ordinary reason, or because the original repayment plan failed; the file has to tell you which one it is.
Where a discharge goes wrong
Three failure modes account for most of it. A payout figure that has expired between issue and settlement, leaving a shortfall nobody has authority to waive on the day. A discharge executed but not lodged, which leaves a satisfied mortgage sitting on the register and a borrower unable to deal with the title. And a partial discharge on a security over more than one title being treated as a full one, which quietly releases collateral that was doing real work.
What happens when the borrower stops paying?
Six things, in this order: the default is identified, notice is served under the state's statute, the notice period runs, possession or sale follows, the proceeds are applied down the waterfall, and any shortfall becomes an unsecured debt. The order does not change with the size of the loan, and the parts you control end at step two.
- The default is identified against the loan agreement, not against your patience. What counts as default, and whether a grace period applies, is a document question. Serving a notice on a default the agreement does not recognise restarts the clock at best.
- The statutory notice is served. This is where the state you are lending in starts to matter, and the periods are in the table under what each form of security is worth. In Queensland no agreement can shorten the 30 days. In Victoria the mortgage can vary both periods.
- The period runs, and it runs consecutively where the state provides for two periods. The most common error at this step is treating one period as covering both stages.
- Possession or sale. A mortgagee exercising a power of sale owes a duty as to price, set out under who gets paid first. In New South Wales that duty applies despite any stipulation to the contrary, and a person who suffers loss from a breach has a claim in damages, but the purchaser's title is not disturbed.
- The proceeds are applied in the statutory order. Enforcement costs come out first, ahead of every lender, which is why a slow or contested sale erodes the junior position and not the senior one.
- Any shortfall is an unsecured debt against the borrower and any guarantor. Security that has been exhausted is gone. What is left is a personal covenant and whatever that person is actually worth, which is why the personal insolvency search matters before you advance rather than after.
What a second mortgagee can and cannot do
A second mortgagee holds the same statutory power of sale as the first and can exercise it. What it cannot do is sell free of the first mortgage without dealing with it, so in practice a second mortgagee enforcing alone is selling an asset that must clear the senior debt, the enforcement costs and then reach them. The realistic options are usually to fund out the first mortgage and take over the enforcement, to negotiate with a first mortgagee who is already enforcing, or to wait and take what the waterfall delivers. Which of those is available is a function of the size of the first debt relative to the property, not of how the mortgage is worded.
Everything in this section is a legal process with statutory consequences for getting it wrong. It is set out here so you know the shape and the sequence before you are in it. The moment a default is real, the next call is to a property lawyer, not to a guide.
What happens if the borrower becomes insolvent?
Your registered mortgage survives, but the timetable stops being yours. Insolvency does not extinguish a registered mortgage. What it does is impose a statutory process on top of the one in the previous section, and the process differs depending on whether the borrower is a company or an individual, and on which insolvency procedure has started.
Voluntary administration
This is where most lenders discover a provision they had not read. Corporations Act 2001 s 440B "Restrictions on exercise of third party property rights" imposes a moratorium: during the administration a secured party generally cannot enforce a security interest except with the administrator's written consent or the leave of the court. Enforcement is defined broadly and includes appointing a receiver and entering into possession, so the freeze reaches the steps a mortgagee would otherwise take.
There is a well-known exception and it is narrower than its reputation. Corporations Act 2001 s 441A "Secured party acts before or during decision period" preserves the position of a secured party whose security is over the whole, or substantially the whole, of the company's property and who acts within the decision period, which runs to the end of the thirteenth business day after notice of the administrator's appointment is received. One mortgage over one property is generally not security over the whole or substantially the whole of a company's property. A Victorian appellate decision has held that a security covering 68 per cent by value did not meet that description, which gives some sense of how demanding the test is. A private mortgagee who has heard the phrase "13 business days" and assumes it applies to them is usually assuming the wrong thing.
Deed of company arrangement
If the creditors resolve that the company execute a deed of company arrangement, the deed binds creditors generally. It does not bind you in the same way. Corporations Act 2001 s 444D "Effect of deed on creditors" preserves the position of a secured creditor who did not vote in favour of the resolution that the company execute the deed: that creditor retains the right to realise or otherwise deal with the security. How you vote at the creditors' meeting is therefore a decision with direct consequences for your security, and it should be made with advice rather than by turning up.
Liquidation
A winding up does not take your security either. Corporations Act 2001 s 471C "Secured creditor's rights not affected" preserves a secured creditor's right to realise or otherwise deal with the security. What changes is the treatment of anything you are not covered for. Where you want to prove for a shortfall in the winding up, Corporations Act 2001 s 554E "Secured creditors" governs the election: broadly, surrender the security and prove for the whole debt, or realise the security and prove for the balance, or value the security and prove for the difference. The election has consequences and it is not reversible on a whim.
Where the borrower is an individual
Bankruptcy vests the bankrupt's property in the trustee, but the Bankruptcy Act 1966 preserves a secured creditor's right to realise or otherwise deal with the security. The practical differences are that you are now dealing with a trustee rather than the borrower, that a shortfall is proved in the bankruptcy alongside every other unsecured claim, and that the trustee has powers to investigate transactions that the borrower entered into before the bankruptcy. Those investigation powers are the reason a mortgage taken shortly before an insolvency, or taken for less than its worth, is not as safe as one taken in the ordinary course.
| Procedure | Can you still enforce | The provision to read |
|---|---|---|
| Voluntary administration | Generally not, without the administrator's written consent or the leave of the court. | s 440B "Restrictions on exercise of third party property rights" |
| Administration, security over the whole of the property | Yes, if you act inside the decision period. One property is generally not the whole or substantially the whole. | s 441A "Secured party acts before or during decision period" |
| Deed of company arrangement | Yes, if you did not vote in favour of the resolution that the company execute the deed. | s 444D "Effect of deed on creditors" |
| Liquidation | Yes. A shortfall is proved in the winding up. | s 471C "Secured creditor's rights not affected", with s 554E on the election |
| Bankruptcy of an individual borrower | Yes, subject to the trustee's powers to investigate earlier transactions. | Bankruptcy Act 1966, and advice on the specific facts |
None of this is a decision to make from a guide. Insolvency deadlines are short, the elections are consequential and several of them cannot be undone. If you are reading this because a notice has already arrived, the useful next step is a solicitor who acts for secured creditors, today rather than after the meeting.
Can an SMSF lend money on a private mortgage?
To an unrelated borrower, generally yes. To a member or a relative of a member, never, in any amount. The prohibition is not a threshold or a percentage. It is absolute, and it is the rule most often attributed to the wrong section.
Section 65 of the Superannuation Industry (Supervision) Act 1993, headed "Lending to members prohibited", prohibits the trustee of a regulated superannuation fund from lending money to, or providing financial assistance using the resources of the fund to, a member of the fund or a relative of a member. That is the operative provision. It is frequently cited as section 62, which is the sole purpose test and does something different: it requires the fund to be maintained for the purpose of providing retirement benefits, and it applies to the loan as an investment rather than to the identity of the borrower. Both matter. They are not the same rule and the penalties differ.
Between the two extremes sits a middle case that catches people. A loan to a related party who is not a member or a relative, such as a company or trust connected to the fund, is not banned outright. It is an in-house asset under Part 8 of the Act, and in-house assets are capped at 5 per cent of the market value of the fund's total assets. Exceed the cap and the fund has a rectification obligation, not a discretion. Indirect arrangements are caught too: routing assistance through an interposed entity does not take it outside section 65.
| The borrower | Permitted | The constraint that governs |
|---|---|---|
| A member of the fund | No. No amount, no terms. | SIS Act s 65 "Lending to members prohibited", an outright prohibition on lending or financial assistance. |
| A relative of a member | No. Same position. | SIS Act s 65. Indirect assistance through an interposed entity is also caught. |
| A related party that is not a member or relative | Capped. | In-house asset rules in Part 8. 5 per cent of the fund's total assets at market value. |
| A genuinely unrelated third party | Yes, subject to the rules below. | Sole purpose test, the arm's length requirement, and the fund's own investment strategy. |
Where the borrower is genuinely unrelated
The questions stop being about identity and start being about terms. The transaction has to be on arm's length terms, and that cuts in both directions. Terms that favour the borrower put the sole purpose test and the arm's length requirement in issue. Terms that favour the fund can produce non-arm's length income, taxed at the top marginal rate rather than at the concessional rate. A mortgage is not a licence to charge whatever the market will bear simply because a superannuation fund is on the lending side.
The fund's investment strategy is the document that decides whether the loan belongs in the fund at all. A strategy that does not contemplate direct mortgage lending, or that is silent on the liquidity consequences of locking capital into a single loan with a single exit, is the first thing an auditor reads. Everything on this page about security, registration, priority and enforcement applies to a fund exactly as it applies to an individual, and a trustee who ends up as mortgagee in possession of a commercial property has acquired a set of problems the investment strategy probably did not contemplate either.
One more layer since 1 July 2026
Funds with large balances now face an additional tax layer above legislated thresholds, applying from the 2026-27 income year and measured at year end. It does not change what a fund may lend on, but it changes the after-tax arithmetic of holding an income-producing asset inside the fund, and it is a reason to have the conversation with the fund's accountant before the loan is made rather than at the next return.
This is a question for the fund's accountant, auditor and adviser rather than for a broker or a general guide, and the consequences of getting it wrong sit with the trustees personally.
How is the interest on a private mortgage taxed?
Interest you receive as a private mortgage lender is assessable income in the entity that made the loan, in the year it is derived, and the entity you lend through decides the rate. That is why the lending entity is a decision to make before settlement rather than an afterthought once the money is out.
The company trap
Lending through a company is the structure people reach for, and it is the one where the arithmetic most often surprises them. Australia has two company tax rates: the base rate entity rate and the standard rate. A company qualifies for the lower rate only where its aggregated turnover is under the threshold and no more than 80 per cent of its assessable income is base rate entity passive income. Interest is base rate entity passive income. A company set up for the purpose of lending money will usually have close to 100 per cent passive income, fail the test, and pay the higher rate rather than the lower one its owner assumed when the structure was recommended.
The bad debt trap
The second surprise arrives only if things go wrong, which is exactly when it is least welcome. The deduction for bad debts in the income tax law is available where the debt was included in assessable income, or where it is in respect of money lent in the ordinary course of a business of lending money. A person or entity doing one private mortgage, or a handful, is generally not carrying on a business of lending money. The consequence is that principal you never recover is not deductible as a bad debt. It falls to be dealt with under the capital gains provisions, typically as a capital loss when the debt comes to an end, which can only be offset against capital gains rather than against your other income.
Those two points together are the reason the tax question belongs before the loan and not after it. Interest at a good rate taxed at the higher company rate, with an unrecoverable principal that cannot be deducted, is a materially different proposition from the one on the front of the information memorandum.
| Lending entity | How the interest is taxed | The thing that catches people |
|---|---|---|
| An individual | At your marginal rate, in the year the interest is derived. | Derivation, not receipt. Interest that is capitalised rather than paid may still be assessable before you have seen it. |
| A company | At the company rate, but interest is base rate entity passive income. | A company lending money will usually fail the 80 per cent passive income test and pay the standard rate, not the base rate entity rate. |
| A discretionary trust | In the hands of beneficiaries presently entitled at the end of the income year. | Where no beneficiary is presently entitled, the trustee is assessed, and that can be at the top rate. |
| A superannuation fund | At the concessional fund rate, if everything is arm's length. | Non-arm's length income is taxed at the top rate. See whether an SMSF can lend. |
| A non-resident lender | Interest withholding applies, and the obligation sits with the payer. | Becoming a non-resident during the loan changes the position mid-term, including for a trust distributing to a non-resident beneficiary. |
None of the above is a substitute for advice. Take the loan agreement to your accountant before it is signed, and ask specifically about derivation of capitalised interest, the entity's passive income position, and what happens if part of the principal is never recovered.
Read from the lender's seat, this whole area reduces to four sentences. What you are holding in law is decided by whether the money is yours directly or pooled, and that single fork decides which rules apply to everything downstream. What your security is worth is decided by what it lets you do on default, which is why a registered mortgage and a caveat are not two points on one scale but two different things. Where your money sits in the queue is decided by the order of registration, not by the order in which the loans were made. And none of it is guaranteed by anyone.
The register is the only part of the file that other people can change without telling you. Everything else you can hold in your hand.
Frequently Asked Questions
Sometimes. Lending to a consumer for a personal purpose, where a charge is made, generally brings you inside the credit perimeter and a licence is required. Lending to a business for a business purpose generally does not, though the purpose must be genuine rather than declared. The security you take is irrelevant to the answer: the form of your mortgage and its position in the order of registration change nothing. ASIC sets out its position in Regulatory Guide 203 "Do you need a credit licence?", and the full licensing analysis is in the guide to becoming a private lender.
Not simply because a direct mortgage exists. The wholesale-client rules are part of the financial-product regime, so they matter most when you are being offered an interest in a mortgage fund, managed investment scheme or another financial product. Many private mortgage funds and contributory structures are offered only to wholesale investors, but a mortgage you hold directly is characterised differently. If someone asks you for a wholesale or sophisticated investor certificate, treat that as a clue about the structure you are being offered and read the wholesale investor certificate guide before assuming it is routine paperwork.
No. The Financial Claims Scheme protects deposits held with an authorised deposit-taking institution up to a per-person, per-institution cap. It does not extend to a mortgage you hold directly, and it does not extend to units in a mortgage scheme or mortgage fund, whatever the product is called. If you are comparing this with a term deposit, that is the difference that matters most and it is the one least likely to appear in an offer document. Your protection here is the registered mortgage itself and the property behind it, not a guarantee.
The lender advances against a mortgage registered on the title in first position, and that registration is what gives the arrangement its value. It puts the lender first in the order of registration, which determines priority, and it brings the statutory default and sale machinery of the relevant state into play. In Victoria that is a notice under Transfer of Land Act s 76 followed by sale under s 77. The loan agreement creates the debt and the mortgage instrument creates the security. One does not substitute for the other.
There is no single market-wide minimum or maximum that applies to every private mortgage investment. A direct deal is sized to the particular loan and security, while a fund or contributory vehicle can set its own minimum contribution in its offer documents. The more useful question is how much of the property value is already spoken for and how concentrated your own exposure becomes. For a junior mortgage, compare the proposed advance with the senior debt and the current valuation using the loan to value ratio, then read the combined-LVR example in the FAQ below.
Not always. In a single direct loan, the investor or the investor's lending entity may be registered as mortgagee. Where several investors participate, the title can instead show multiple mortgagees or a nominee, trustee or responsible entity. In a registered managed investment scheme, the responsible entity holds scheme property on trust for members under Corporations Act s 601FC(2), so the investor owns an interest in the scheme, not the mortgage personally. Before investing, establish whose name will hold the security and who can approve an extension, vary the loan or start enforcement. See who holds the mortgage and controls enforcement.
To a genuinely unrelated borrower, generally yes. To a member of the fund or a relative of a member, never, in any amount, under SIS Act s 65. A loan to a related party who is not a member or relative is not banned but is an in-house asset capped at 5 per cent of the fund's total assets. Where the borrower is unrelated, the loan still has to satisfy the sole purpose test, be on arm's length terms and sit inside the fund's investment strategy. The detail is under whether an SMSF can lend.
A deed of priority is an agreement between secured lenders setting out how they rank as between themselves, and often caps what the senior security is treated as securing. It binds the lenders who signed it, but it is not a change to the register. In New South Wales there is a separate registered mechanism for that, in Real Property Act s 56A, which postpones one mortgage to another by a memorandum in the approved form and only takes effect on registration. You need one where another registered mortgagee's behaviour could affect your position, particularly through further advances.
Generally not, without the administrator's written consent or the leave of the court. Corporations Act s 440B imposes a moratorium on enforcing a security interest during a voluntary administration, and enforcement is defined broadly enough to catch appointing a receiver and entering into possession. The exception in s 441A, which preserves a secured party acting within the decision period, only applies to security over the whole or substantially the whole of the company's property, and one mortgage over one property generally is not that. The detail is under what happens if the borrower becomes insolvent.
Only where you are making loans in the course of carrying on a loans business, which is the trigger in AML/CTF Act s 6, table 1, item 6, and the Act does not define that phrase: the dictionary in s 5 defines loan and stops there. It is a question about your own status rather than about any single designated service, and it is answered properly in the guide to becoming a private lender. Where it applies, identification must be complete before settlement, and records outlive the loan.
Not automatically. A direct private mortgage is a private debt and security position, not an at-call deposit. Early exit depends on the loan documents, whether the borrower repays early or another party can take the lender's position, and any consents, transfer documents or registrations required. A pooled mortgage fund follows its own redemption rules and available liquidity, which can be restricted even where withdrawals are ordinarily offered. The lifecycle is set out under what happens at maturity.
For a second mortgage, the useful figure is usually the combined loan to value ratio: the debt secured ahead of you plus the proposed second mortgage, divided by the property value, multiplied by 100. If a property is valued at $1,000,000, the first mortgage is $500,000 and the proposed second mortgage is $150,000, the combined LVR is 65 per cent. The arithmetic is simple; the hard part is confirming the senior debt and deciding which valuation basis belongs in the denominator. There is no universal "safe" LVR, and the deal-sheet section explains what to verify.
What sources support this guide?
This guide relies primarily on current Commonwealth and state legislation, regulator and government material, land-registry guidance and primary case law. Every statutory provision quoted on this page was read in a per-section view of the current consolidation rather than taken from a secondary summary, and current investor-risk context was checked against Moneysmart and ASIC. Where a claim did not survive that check it was removed rather than softened.
The first is the mechanism for registering a second mortgage. The section usually cited is expressed in the language of paper certificates of title, which no longer exist in the states that have completed the move to electronic conveyancing. The obligation is real and the vocabulary is not, so this page states both. The second is the Victorian tacking claim, which is not made here, because the section usually cited for it is a production mechanism rather than a priority rule. The third is the anti-money-laundering timetable, where a widely repeated enrolment date could not be verified as a general obligation and is therefore absent, and where the commencement of the provisions and the application of the obligations are stated as the two separate dates they are. The fourth is ABN Lookup, often described as never revealing a trustee: it has no trustee field, which is a different and more useful statement, because a corporate trustee is frequently identifiable from the registered entity or trading name. The fifth is the currency of the credit facility regulation, which is flagged on the page itself rather than quietly ignored.
One further method note. Automated retrieval of long Commonwealth Acts truncates, and has been observed to produce confidently worded text for provisions that was not in the source document at all. Every quotation here survived a second, independent read before it was allowed onto the page.
| Source | Read for | Read on |
|---|---|---|
| Corporations Act 2001 (Cth), Chapter 7 | s 765A "Specific things that are not financial products", the credit facility exclusion; s 764A "Specific things that are financial products", scheme interests. | 15 August 2026 |
| Corporations Act 2001 (Cth), Chapter 5 | s 440B, s 441A, s 444D, s 471C and s 554E, the position of a secured creditor in administration, under a deed of company arrangement and in liquidation. | 15 August 2026 |
| Corporations Regulations 2001 (Cth) | reg 7.1.06(1)(a), (f), (g) and (h). Quoted as at compilation 212, 21 April 2026; a later version commenced 11 August 2026 and is not yet compiled. | 15 August 2026 |
| National Credit Code (Cth) and ASIC RG 203 | The credit perimeter, used on this page only to state where the boundary falls before routing the question elsewhere. | 15 August 2026 |
| AML/CTF Act 2006 (Cth) | s 6 "Designated services", table 1, items 6 and 7; s 5 dictionary, confirming no definition of "loans business". | 15 August 2026 |
| AML/CTF Amendment Act 2024 (Cth) | The s 2 commencement table, and Schedule 3 Part 4, which delays application of the new obligations for the newly captured sectors. | 15 August 2026 |
| Personal Property Securities Act 2009 (Cth) | s 10 "Meaning of personal property"; s 61 "Voluntary subordination of security interests". | 15 August 2026 |
| Superannuation Industry (Supervision) Act 1993 (Cth) | s 62 sole purpose test; s 65 "Lending to members prohibited"; Part 8, the in-house asset rules and the 5 per cent limit. | 15 August 2026 |
| Real Property Act 1900 (NSW) | s 36 "Instruments to be registered in order of lodgment", subsection (9); s 56A "Postponement of mortgages"; s 57 and s 58, default notice and application of proceeds. | 15 August 2026 |
| Conveyancing Act 1919 (NSW) | s 111A "Duties of mortgagees and chargees in respect of sale price of land", including subsections (4) and (5). | 15 August 2026 |
| Transfer of Land Act 1958 (Vic) | s 76 and s 77 "Powers of mortgagee or annuitant on default", including the application of proceeds; s 86, production of the certificate of title. | 15 August 2026 |
| Property Law Act 2023 (Qld), in force from 1 August 2025 | s 114 "Restriction on exercise of power of sale"; s 116 "Duty of mortgagee as to sale price", including the 28-day post-sale notice. | 15 August 2026 |
| Land Title Act 1994 (Qld) | s 140, the priority notice covering the gap between signing and registration. | 15 August 2026 |
| Transfer of Land Act 1893 (WA) | ss 106 and 108, read together, the default notice and power of sale; s 138B, lapsing of s 138A caveats. | 15 August 2026 |
| Bankruptcy Act 1966 (Cth) | The preservation of a secured creditor's right to realise, and the treatment of a shortfall. | 15 August 2026 |
| Stubbings v Jams 2 Pty Ltd [2022] HCA 6 | The characterisation of an interposed company borrower in an asset-based lending structure. | 15 August 2026 |
| Moneysmart and ASIC private credit material | How private credit funds work; security and capital-structure questions; liquidity, valuation, fees and conflicts; and ASIC's June 2026 focus on valuation quality, borrower stress, liquidity and investor disclosure. | 16 August 2026 |
| ATO, APRA, PPSR, ABN Lookup, AFSA and PEXA | Base rate entity passive income and the bad debt provisions; the Financial Claims Scheme and its scope; register scope and coverage; the absence of a trustee field; the personal insolvency index search fee; settlement and lodgement windows by state. | 15 August 2026 |
| Land registries: Victoria, New South Wales and Queensland | Title nomination, control of the right to deal, and the practical requirements for registering a subsequent mortgage electronically. | 15 August 2026 |
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