What It Costs to Go Direct to a Private Lender
Going Direct to a Private Lender: Cost | Switchboard Finance
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What It Costs to Go Direct to a Private Lender
Going direct to one private lender looks simple, but the rate, the establishment and legal cost stack and the exit terms all come from a single source with nothing to compare them against. Here is what that really costs, and when a broker pays for itself.
Quick Answer
Going direct to a private lender means single-lender pricing with no panel tension on price, so you cannot tell a fair deal from a heavy one. A private lending broker compares the cost stack across funders before you commit.
What does it actually cost to go direct to a private lender?
The real cost of going direct is the cost of having nothing to compare against. When you approach one private funder, that funder sets the rate, the establishment and legal cost stack and the security terms in a single quote, and you take it or leave it. There is no panel tension on price, so a quote that looks reasonable on its own can still sit well above what the same file would attract elsewhere.
For self-employed and business borrowers, this is the trap in property-secured private finance. The headline rate is only one line. What I usually see priced into these is an establishment and legal cost stack that varies by lender, plus exit and rollover risk that does not show up until the facility is due. A private lending arrangement priced by a single source carries all of that with no second opinion attached.
The cost stack: going direct versus a brokered file
The table below sets the same deal side by side. The numbers are deliberately left out because they are Category A, illustrative and varies by lender. What matters is where the cost actually sits, and who is positioned to test it.
The two cost lines that catch people are the establishment and legal cost stack, varies by lender, and the exit. A single funder has no reason to sharpen either when there is no competing quote in the room. Against the macro backdrop, non-bank lending has kept growing as banks tightened, which the Reserve Bank of Australia tracks in its financial stability work, so there are more private funders to compare than most borrowers realise.
When going direct passes, and when it fails you
Going direct is not always the wrong call. It passes when the deal is genuinely simple and the clock is the only real constraint. It fails the moment price, structure or exit carries weight, because that is exactly where a single quote leaves money and risk on the table.
Where going direct can pass
- The amount is small and the timeline is genuinely too short for a comparison
- You already hold a funder relationship whose pricing you can benchmark
- Clean title, single security, and a short, certain exit
- You understand the full cost stack, not just the headline rate
Where going direct fails you
- You have nothing to compare single-lender pricing against
- The establishment and legal cost stack is opaque and varies by lender
- Exit and rollover risk is underpriced in the first quote
- The security position is mispriced for the file
In the files that cross my desk, the costliest version of going direct is not a bad rate. It is a mispriced security position on a deal that should have been a second mortgage or a cleaner registered structure. The borrower saved a week and paid for it on the exit. If you want the borrower-side view of the trade-offs, the private mortgage borrower decision guide walks through the same decision from the other direction.
How a broker changes the cost, not just the paperwork
A broker is not a middle layer that adds cost. The value is panel access plus deal positioning: one file presented to several funders, so the price has to compete. That is the structural difference between a brokered deal and going direct, where a single lender gives one answer and one price with no pressure to move.
It also changes the risk, not only the rate. A broker can position the file as a registered charge instead of an over-priced short-term facility, weigh a caveat against a second mortgage, and pressure-test the exit before anyone signs. Pre-EOFY, with 30 June 2026 close, that exit timing matters more than usual, and a rushed single quote is the easiest way to lock in exit and rollover risk. If second-charge pricing is the question, the current view on second mortgage rates is a useful benchmark to bring to any direct quote, and the second mortgage and caveat loan definitions set the language.
What to compare before you accept a direct quote
Before you sign a single private quote, compare it on the levers that actually move the cost: the rate against a panel, the establishment cost, legal and valuation, the security position, and the exit and rollover terms. A direct quote gives you one number for each. A brokered file gives you a range to judge each number against. The lever that catches most self-employed borrowers out is the exit, not the headline rate.
If you cannot benchmark a direct quote against at least one other funder, you are pricing blind. The quickest sanity check is to read the quote against a known structure, such as a registered second mortgage, or to weigh the whole decision through the property-backed funding decision tree before you commit to anything.
Going direct to a private lender is rarely cheaper once the full cost stack lands. You get single-lender pricing with no panel tension on price, an establishment and legal cost stack that varies by lender, and exit and rollover risk that sits entirely with you. Going direct can pass on small, simple, time-critical deals, but on anything where price, structure or exit carries weight, the comparison a broker brings is what protects the cost.
Key takeaway: Before you accept a direct private quote, get the same file compared across funders so you can tell a fair cost stack from a heavy one.Frequently Asked Questions
Going directly to a private lender is not reliably cheaper, because a single direct approach gives you single-lender pricing with no panel tension on price. One funder sets the rate, the establishment and legal cost stack and the security terms, and you have nothing to compare them against. A private lending broker can place the same file across several funders, which is usually where competitive pricing comes from.
Private lenders typically charge an establishment and legal cost stack that varies by lender, usually alongside the headline interest cost. Establishment costs are commonly an indicative percentage of the loan and legal or valuation costs sit on top, all varying by lender and deal. Reading these against a private lending benchmark, or a second mortgage alternative, is how you tell a fair stack from a heavy one.
A second mortgage can be cheaper than a direct private loan when the title is clean and the timeline allows, because a registered second charge is often priced below short-term private finance. The trade-off is speed and first mortgagee consent. Comparing a second mortgage against a direct private deal is exactly the kind of comparison a single-lender application cannot give you.
The hidden costs of private lending usually sit in exit and rollover risk rather than the headline rate. A facility that cannot be exited on time can roll into extension or default pricing, and a mispriced security position can cost more than any establishment fee. Looking at how private mortgage lenders operate shows where these costs tend to hide.
Using a broker for private lending makes sense when you want more than one funder's answer and one price, particularly for property-secured deals where structure matters. A broker brings panel access and deal positioning, and can weigh a caveat loan against a registered option before you commit. You can explore the property lending hub or speak to a broker to start.
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