Private Mortgage Lenders Australia: How They Work, Costs & Risks
Property Lending
Non-bank finance · Property security · Exit strategy
Private mortgage lenders provide property-secured finance outside standard bank channels. This Australian guide explains how private mortgages work, what they cost, the key risks and rules, what lenders check, and how they compare with banks, caveat loans and second mortgages.
Quick Answer
A private mortgage lender is a person, fund or specialist non-bank lender that advances money secured by a mortgage over Australian property. In commercial lending, approval commonly focuses on property equity, mortgage priority and a credible repayment exit, although income, credit history and loan purpose may still be assessed.
| Your question | Short answer |
|---|---|
| What is a private mortgage lender? | A person, fund or specialist non-bank lender that provides a loan secured by real property using private capital rather than bank deposits. |
| Is it legal and regulated? | Yes. Regulation depends on the borrower and purpose. Consumer and residential-investment credit can be regulated; genuine business-purpose credit is generally outside the National Credit Act, while other laws still apply. |
| Is it safe? | It can be, but checks are essential. Verify the lender and entity, confirm AFCA membership, compare the total cost, read default terms and sign a business purpose declaration only when it is true. |
| What does it cost? | Total cost is interest plus establishment, valuation, legal, line, exit and any extension or default costs. There is no standard rate. |
| How fast is it? | Often faster than a bank once the file is complete, but valuation, title, legal documents and first-mortgagee consent can still control settlement timing. |
| Private mortgage, caveat or second mortgage? | Private lending describes the funding category. A private mortgage uses a registered mortgage; a second mortgage is registered behind an existing first mortgage; and a caveat loan uses a caveat instead. |
| Bank or private lender? | Use a bank when the deal fits policy and the deadline allows it. A private mortgage is for a property-backed commercial need where flexibility or timing justifies the higher total cost. |
What is a private mortgage lender?
A private mortgage lender provides a loan secured by real property using private or non-bank capital rather than bank deposits. The term can cover consumer or commercial credit. This guide focuses on the short-term, business-purpose private mortgages commonly used by Australian business owners, investors and developers, where the lender relies mainly on property equity, security position and a credible exit. A private mortgage is the loan itself, not lenders mortgage insurance.
Three kinds of lender wear the label. Individuals and family offices lending their own capital, often through a solicitor or a fund manager. Private credit funds and mortgage trusts that pool investor money and run a credit committee. And specialist non-bank lenders that look like a small bank without the deposits or the prudential framework. Australia's private credit market is estimated at around $200 billion, about half of it real estate focused (ASIC REP 814, as at September 2025), so this is an established part of the market, not a fringe. That is an ASIC commissioned estimate, and market size estimates vary.
What we arrange sits at the property-secured end of that market: see what a private mortgage lender arranges and the broader private lending page, while this guide stays on how the market itself works. Used well, a private mortgage is a deliberate tool with a defined way out, not a loophole and not a last resort.
How do private mortgage lenders work?
A private mortgage works by securing a loan against real property with a registered first or second mortgage and underwriting it to a defined repayment event. The lender checks the property's value, existing debts, security position and exit, then issues terms, completes valuation, title and legal work, settles, and releases the mortgage when the loan is repaid. Some private loans use a caveat instead, but a caveat is a different form of security and is not a registered mortgage.
- Scenario and enquiry: the property, what is owing on it, the amount needed, the business purpose and the intended exit.
- Indicative terms: a letter of offer setting out rate, fees, term and conditions. Timing depends on whether the scenario, security and exit evidence are complete.
- Valuation and title: the lender confirms what the security is worth and what is registered against it.
- Documents and consents: loan and mortgage documents are prepared, and where the loan sits behind an existing lender, first mortgagee consent is sought.
- Settlement: funds advance, the mortgage or caveat goes on title, and the term starts running.
- Discharge: at the exit the loan is repaid and the security is released from title.
Because the file turns on security and exit rather than income, a second mortgage behind a bank loan you want to keep is common, and the way a funder behaves inside that sequence is its own subject, covered in how private mortgage lenders operate.
What do private mortgage lenders cost?
The total cost of a private mortgage is the interest for the expected term plus establishment, valuation, legal, line, exit and any extension or default costs. There is no standard rate, and comparing headline interest alone can produce the wrong answer. Put every offer onto the same term and compare the projected payout amount. This guide does not publish generic indicative rates because actual pricing depends on security position, loan to value, purpose and exit.
Projected payout = principal outstanding + interest to the expected exit date + establishment fee + valuation + lender legal costs + line or exit fees + any extension or default costs.
- ✓ Interest, the price of the money for the term, driven by security position, loan to value and exit strength.
- ✓ Establishment fee, the lender's set up cost, usually a percentage of the facility.
- ✓ Legal fees, the lender's lawyers documenting the loan and the security.
- ✓ Valuation, evidence of what the security is worth, at the tier the lender accepts.
- ✓ Line and exit fees, the price of drawing and of leaving, including any extension if the exit runs late.
- ✓ Default interest, a higher rate after a breach, so read the events of default before you sign, not after.
From our broking files, indicative and general
In our broking files, the useful first read is not the headline rate. It is whether the security position, requested amount and repayment event tell one consistent story. We keep this qualitative because a generic rate or timing figure can mislead on a short-term, property-secured facility.
- What an underwriter checks first: the current property value, every debt or caveat already on title, the amount requested, the proposed security position and the event that repays the loan.
- What commonly creates avoidable delay: stale payout figures, missing valuation access, incomplete company or guarantor identification, an undisclosed title issue, or first-mortgagee consent being considered too late.
- What separates an exit from a hope: evidence of what will change before expiry, such as a signed sale path, completed works, lodged financials, debt reduction or a bank-refinance condition that can actually be met.
- What moves terms: stronger equity, a lower loan-to-value request, clean consent and a documented fallback generally help; a contested title, unclear use of funds or an unsupported exit generally work against the file.
Indicative and general only, from broking experience as at July 2026. Not a quote, not an offer, and not a statement of the rate, cost, approval or outcome you will get. Your terms depend on your security, your exit and the lender. Private mortgages are usually short term, higher cost finance; get independent legal and financial advice.
Where this lands is a total cost comparison over the expected term: the rate translated to one basis, establishment and legal costs added, and any capitalised interest projected to the payout date. For the consumer side view of comparison rates and fees, Moneysmart is a sound primer.
What are the key risks of a private mortgage?
Private mortgage lenders are not inherently unsafe, but many business-purpose loans give the borrower fewer statutory protections than consumer credit. The main risks are a higher total cost, a short term and failed exit, personal guarantees, enforceable rights over the property after default, and documents or declarations that do not match the true purpose. Those risks are manageable only when the lender, total cost and exit are checked before signing.
That last risk is not hypothetical. ASIC has alleged that one lender, Oak Capital, made up to 47 loans totalling over $37 million structured through company borrowers to avoid the National Credit Code (ASIC media release 24-243MR). These are allegations only: the matter is before the Federal Court, no findings have been made, the Oak Capital companies were placed in liquidation in May 2026, and in June 2026 ASIC sought the court's leave to continue the proceeding. It is illustrative of the regulatory risk in structuring around the Credit Code, not a statement that any particular lender has breached the law, and it is the reason the checks in the next section matter.
A well run private lender
- Explains the total cost, the term and the default terms in plain words
- Asks about your exit first, and tests whether it is real
- Takes security openly and registers it properly
- Is easy to identify: real entity, real office, checkable history
Walk away if
- Large fees are demanded up front before anything is done
- The exit is hand waved, or the paperwork is rushed past you
- You are pushed to sign a business purpose declaration that is not true
- The lender is hard to identify or evasive about its structure
None of this makes private lending unsafe as a category; it makes the checking non-optional. If you would like a second read on a specific lender or offer, get in touch before you sign anything.
Are private mortgage lenders regulated in Australia?
Regulation depends on who borrows and what the money is actually used for. Credit to an individual for personal, domestic or household use, or for regulated residential-property investment, can fall under the National Credit Code. A genuine business-purpose private mortgage is generally outside that Code, but contract law, the land title system, the ASIC Act and unfair-contract-term rules can still apply. The purpose, not the label, decides the protection.
The sector is also under a brighter regulatory light than it used to be: ASIC's private credit surveillance reviewed 28 funds holding around $29.8 billion between them (ASIC REP 820, released November 2025) and set out a 2026 surveillance focus on fees, valuations and governance. That is context for borrowers rather than a rule change. The primary sources are short and readable: ASIC INFO 101 on when the credit law applies, and the National Consumer Credit Protection Act 2009 itself, which carries the National Credit Code.
What is a business purpose declaration?
A business purpose declaration records that the credit is wholly or predominantly for business purposes, or for investment other than regulated residential-property investment. It is evidence of the loan's purpose; it does not by itself remove the National Credit Code when the real use is personal, domestic, household or regulated residential investment. Sign it only when it is true.
The honesty limit is real. A declaration does not turn a consumer loan into a commercial one by itself; where the true purpose is a consumer one, the protections can still apply, and a lender that structured around them can be challenged. ASIC has alleged exactly this kind of structuring in one case, described in the risks section below, and it is the clearest reason to treat the declaration as substance rather than a formality. If the purpose of your borrowing is genuinely a business one, a clear use of funds and a documented exit strategy are what make that real on the file.
What do private mortgage lenders require?
Five things carry a private mortgage approval: property with real equity, a known security position, a genuine business purpose, complete borrower and guarantor documents, and a dated exit supported by evidence. Income evidence can carry less weight than it does at a bank, but the file still has to prove every fact the lender relies on. A complete, internally consistent file is the biggest settlement-speed lever the borrower controls.
- ✓ Equity: a current rates notice or valuation evidence, and the balance owing on every registered loan, so the lender can see the real headroom.
- ✓ Title: a title search showing exactly what is registered, with no surprises for the lender to find later.
- ✓ Purpose and entity: an active ABN, the borrowing structure, and a business purpose you can state in one sentence and declare truthfully.
- ✓ Guarantees: directors usually guarantee company borrowing, so know what that means first, starting with the guarantor entry.
- ✓ Exit: a dated, documented exit, because it is assessed before almost anything else.
From the underwriter's seat the order of reading is security, then exit, then everything else, which is roughly the reverse of a bank's order. If you want an indicative read on where your scenario lands, you can check your eligibility or talk it through with a private mortgage lender before you commit to anything.
Private mortgage lender vs bank: what is the difference?
A bank generally offers lower-cost, longer-term credit but assesses the borrower through standard serviceability and policy. A private mortgage lender usually offers shorter-term, more flexible property-secured credit at a higher total cost, with greater weight on equity, security position and exit. The right choice depends on whether the bank can approve the actual deal inside the actual deadline.
Swipe horizontally to compare all columns.
| Factor | Bank (APRA-regulated ADI) | Private mortgage lender |
|---|---|---|
| What it assesses | Serviceability from verified income, plus the security | Security, equity and a dated exit, with income secondary |
| Assessment and timing | Policy and serviceability led; timing follows the bank's process | ✓ Security and exit led; often faster once valuation, title and documents are complete |
| Cost | Lower, standardised pricing | Higher, priced to the risk and the term |
| Typical term | Long, often years | Short, often months |
| Regulation and protection | National Credit Act where the borrower and purpose are covered; Banking Code where the bank subscribes | Depends on borrower and purpose; commercial-only lenders may be unlicensed, while ASIC Act and contract rules still apply |
| Best for | A deal that fits policy and can wait | A sound, property-backed deal the bank cannot write in time |
The decision test is blunt: if a bank can approve inside your real deadline, take the bank, because it is almost always cheaper. Where it cannot, a private mortgage buys time you can put a price on. What we arrange as a private mortgage lender is built for exactly that gap, and for deals with a construction or project shape, development finance is its own lane.
Private mortgage vs caveat loan vs second mortgage
The terms describe different parts of a loan rather than three mutually exclusive products. Private lending describes the funding category. A private mortgage is a privately funded loan secured by a registered mortgage. A second mortgage describes registered priority behind an existing first mortgage. A caveat loan uses a caveat rather than a registered mortgage. A private lender can offer any of these structures.
Swipe horizontally to compare all columns.
| Factor | Private mortgage (registered) | Caveat loan | Second mortgage |
|---|---|---|---|
| What the term describes | A private loan secured by a registered mortgage | A private loan supported by a caveat recorded on title | A registered mortgage ranked behind an existing first mortgage |
| Legal position on title | A registered mortgage interest | A notice of a claimed interest; rights and enforcement differ from a registered mortgage | A registered mortgage interest with second priority |
| What controls timing | Valuation, title, legal documents and the required mortgage position | Title, supporting agreement, lender conditions and any existing facility restrictions | First-mortgagee consent, valuation, title and legal documents |
| What controls loan size | Property value, existing debt, requested position, purpose and exit | Property value, existing debt, claimed interest, purpose and lender policy | Equity remaining behind the first mortgage and the combined loan-to-value ratio |
| First mortgagee consent | Not needed when the private lender takes first position | Depends on the first facility terms and lender requirements; an unauthorised caveat can create a breach issue | Commonly required |
In practice a private lender can hold any of these positions, and the same borrower is often quoted very differently on different structures. The caveat loans and second mortgage loans pages each cover their side in full; this guide keeps to how they fit the private mortgage picture.
How do I find and check a private mortgage lender?
To find a private mortgage lender, use a broker with an established lender panel or approach a known lender directly, then compare fit, total cost, conditions and exit requirements rather than speed claims alone. Going direct can work where the lender's policy clearly matches the deal; a broker is useful where the structure needs to be tested across several funders. In either case, verify the legal entity, relevant ASIC registrations, AFCA membership, written terms, security documents and fee requests before you sign.
A commercial-only lender may lawfully operate without an Australian credit licence, so the absence of a licence is not conclusive; it means you need to understand exactly who the lender is and which dispute pathway applies.
- Search the lender and its directors on ASIC's registers, and check whether it holds a credit licence. Commercial-only lenders are not required to hold one, so absence is not damning, but you should know either way.
- Check whether the lender is an AFCA member, because membership decides whether external dispute resolution exists if things go wrong.
- Verify the entity: an ABN lookup, a company search, and a registered office that is a real place. A lender that is hard to identify is answering your question already.
- Treat large upfront fees as the classic warning sign. Paying reasonable valuation and legal costs as a deal progresses is normal; paying thousands up front to unlock funding that never arrives is the standard loan scam shape.
- Have your own solicitor read the loan and security documents before you sign, with the default interest, fees and events of default read first, not last.
A broker does part of this filtering by only placing deals with funders they know settle cleanly, which is a large part of what you are paying for. ASIC's Moneysmart loans guidance is a good consumer side reference for the red flags.
Can I complain to AFCA about a private lender?
Only if the lender is an AFCA member, and many commercial-only private lenders are not. AFCA is the free external dispute resolution scheme for financial complaints, and it can consider small business commercial-lending complaints, but it can only deal with firms that have joined. That single fact is worth checking before you borrow, not after a dispute starts.
If the lender is not a member, your recourse runs through the loan contract and the courts, and the ASIC Act protections against unconscionable and misleading conduct still exist even though the bar to prove them is high. ASIC's guidance on disputes about commercial loans sets out both the AFCA route and the limits, and our guide to how private lending works covers the wider category.
When does a private mortgage make sense?
A private mortgage makes sense when a sound, property-backed deal has a real deadline the bank cannot meet, and a clear way out. It stops making sense the moment the exit becomes hope rather than a plan. Three short scenarios show the line.
The pattern across all three is the same: a private mortgage is a short term route to a defined event, not a substitute for one. Plan the way out before you take the money, and read going direct versus a second mortgage if you are weighing the structure.
Private mortgage lenders provide property-secured finance from private or non-bank capital. Regulation depends on the borrower and purpose; this guide focuses on short-term business-purpose lending, where the lender usually assesses equity, security position and exit more heavily than standard bank serviceability. The borrower should compare the full payout cost, verify the lender and dispute pathway, and test the exit before signing. The deals that work share one shape: a genuine business purpose, verifiable equity, an honest total-cost comparison, and a dated exit with a fallback.
Key takeaway: a private mortgage is a tool for a defined job, priced for flexibility and risk, and the exit plan is what decides whether it was the right tool.Frequently Asked Questions
A private mortgage lender is a person, fund or specialist non-bank lender that provides a loan secured by real property using private capital rather than bank deposits. The term can cover consumer or commercial credit; Switchboard Finance focuses on short-term business-purpose facilities assessed mainly on equity, security position and a credible exit. See our private mortgage lender page for what we arrange.
Yes. Private lending is lawful in Australia. Regulation depends on the borrower and the true use of the money: personal, domestic, household and regulated residential-investment credit can fall under the National Credit Code, while genuine business-purpose lending is generally outside it. Contracts, property law and ASIC Act conduct rules can still apply. General information, not legal advice.
It can be safe, but checks are essential because many business-purpose loans carry fewer statutory protections than consumer credit. Verify the lender and legal entity, check AFCA membership, compare the total payout cost, treat unexplained upfront fees as a warning sign, and have your own solicitor read the loan and security documents before signing.
A private mortgage is secured by a registered first or second mortgage over property. The lender confirms the security and exit, issues indicative terms, completes valuation and title checks, prepares the loan and mortgage documents, and settles. The facility runs to a defined exit, when the loan is repaid and the registered mortgage is discharged. Some private loans use a caveat instead, which is a different security structure.
It depends on the borrower and purpose. Consumer and regulated residential-investment credit can require an Australian credit licence and compliance with the National Credit Act. A lender that only provides commercial loans is not required to hold a credit licence or join AFCA, on ASIC's guidance. ASIC Act conduct rules and unfair-contract-term rules can still apply. General regulatory position, not legal advice.
The terms describe different parts of a loan. Private lending describes the funding category. A private mortgage is a private loan secured by a registered mortgage. A second mortgage is a registered mortgage ranked behind an existing first mortgage. A caveat loan uses a caveat instead of a registered mortgage. A private lender can offer any of these structures.
Search the lender and its directors on ASIC's registers and check whether it holds a credit licence, noting that commercial-only lenders are not required to. Check AFCA membership, because it decides whether external dispute resolution exists. Verify the ABN, the company and a real registered office. Treat large upfront fees as the classic warning sign, and have your own solicitor read the documents before you sign. ASIC's Moneysmart loans guidance is a good consumer-side reference.
Only if the lender is an AFCA member. AFCA can consider small-business commercial-lending complaints, and defines a small business as one with less than 100 employees, but lenders that only provide commercial loans are not required to be members. Check membership before you borrow; if the lender is not a member, your recourse is the courts and your own legal advice. General information, not legal advice.
Generally, deductibility follows what the borrowed money is used for, not who lends it or what secures it. The ATO position is that interest is deductible where the funds are used for an income-producing purpose, and mixed use is apportioned; the ATO guidance on interest deductions sets out the test. A private mortgage used genuinely in a business can therefore carry deductible interest, but this is general information, not tax advice, so confirm your position with your accountant.
A bank generally offers lower-cost, longer-term credit and assesses standard serviceability and policy. A private mortgage lender usually provides shorter-term, more flexible property-secured credit at a higher total cost, with greater weight on equity, security position and exit. Use the bank when it can approve the real deal inside the real deadline.
What sources support this guide?
This guide is built on primary sources: the regulator's own guidance and reports, the legislation, and the dispute resolution scheme, each read again for this update. The table below shows what supports which claim, and how current it is.
Swipe horizontally to review each source and date.
| Source | What it supports | As at |
|---|---|---|
| ASIC INFO 101 | When the National Credit Act applies, the predominant-purpose test, the residential-investment boundary, and the treatment of company borrowers | 20 Oct 2020 |
| ASIC INFO 207 | Lowest protection for commercial loans, the credit-licence and AFCA-membership position, and the AFCA small-business definition | 19 Apr 2024 |
| ASIC REP 814 | Private credit market size, around $200 billion, about half real-estate focused | 22 Sep 2025 |
| ASIC REP 820 | Private credit surveillance of 28 funds and the 2026 surveillance focus | 5 Nov 2025 |
| ASIC media release 24-243MR | The Oak Capital allegations, an unproven Federal Court matter cited as allegation only | Updated 9 Jun 2026 |
| National Consumer Credit Protection Act 2009 | The National Credit Code and the purpose boundary | Current compilation |
| AFCA and ATO guidance | Small-business complaint eligibility and interest deductibility by use of funds | Current guidance |
Where a figure appears in this guide it is shown with its source and date beside it. Regulatory positions are summarised, not reproduced in full, and none of this is legal or financial advice. For consumer side red flags on loans and fees, ASIC's Moneysmart loans guidance is a good reference.
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