Short-term first mortgages: choosing a term from 1 to 24 months

The term of a private first mortgage is more than a date at the bottom of the Letter of Offer. It’s the clock your whole plan runs against. Pick it well and the loan quietly does its job; pick it badly and the last few months become a scramble.

Private first mortgages run for 1 to 24 months. This page is about choosing between them, linking the term to a believable exit, and what to do if the timeline starts to slip.

Why are private first mortgages short-term?

Because they are designed to solve a problem, not to sit on your balance sheet for a decade. A private lender steps in when timing, credit history or paperwork mean a bank can’t help right now. The expectation on both sides is that something specific will happen within the term — a sale settles, a bank refinances, a contract pays — and the loan is repaid.

That shorter horizon is also what makes fast decisions possible. The lender is backing a plan with a visible finish line, secured by first-ranking security over property, rather than modelling the business twenty years out.

How do you choose a term between 1 and 24 months?

Work backwards from the exit. Ask how long the event that repays the loan will realistically take, then add a buffer for the delays that always seem to appear.

Your exit	Term that usually suits	Why
Property already listed or under contract	12 months	The sale is in motion; the buffer covers a slow campaign or a delayed settlement
Large contract or receivable due within months	12 months	Cash is coming; the loan bridges the gap
Business sale with a signed agreement	12 months	Settlement date is known, with room for conditions to be met
Bank refinance after a tough year	24 months	A bank will want to see improved figures on the books, which takes time to build
Clearing ATO debt, then rebuilding lodgment history	24 months	Time to show clean, up-to-date lodgments before refinancing
Completing and selling a development or residual stock	1 to 24 months	Depends on how much is finished and how quickly the market is absorbing stock

A useful test is to write down the date you expect the money to arrive, then ask what would push it back: a buyer’s finance condition, a council approval, a bank wanting one more quarter of figures, a customer paying late. Add enough time to absorb the most likely of those. If the result still sits comfortably inside 12 months, the shorter term usually makes sense. If it pushes past, 24 months gives you breathing room without forcing a rushed sale.

If you’re genuinely unsure, that uncertainty is itself useful information. It usually means the exit needs more work before the loan is set up. Our guide to the exit strategy for a short-term mortgage shows how to stress-test a plan.

What exit strategies work for a short-term first mortgage?

Every loan needs a clear exit. The ones lenders see most often are:

• Sale of the security property or another property you own.
• Refinance to a bank once the issue that caused the bank to say no has been fixed.
• Business cash flow from a contract, seasonal peak or the collection of a large debtor.
• Settlement of a sale — of a business, a share in a business, or a property already sold.

The strongest exits have evidence attached: a signed contract, an agent’s listing agreement, a letter from a broker about bank refinance prospects, or an accountant’s summary of incoming payments.

How does prepaid or capitalised interest fit with the term?

Because the loan is short and the plan often depends on cash arriving at the end, interest can be prepaid at settlement or capitalised (added to the loan), so there may be no monthly repayments during the term. That keeps business cash working on the plan itself.

The trade-off is that interest still accrues and is reflected in the amount repaid at the end, so the term you choose and the interest arrangement need to be sized together. The prepaid or capitalised interest guide explains both options in detail.

Illustrative example: using a 24 month term to clear an ATO debt

ATO debt is one of the most common reasons owners look at a short-term first mortgage. The ATO applies the general interest charge (GIC) to amounts not paid by their due date, and GIC charged from 1 July 2025 onwards can’t be deducted. That changes the arithmetic of simply carrying the debt, so it’s worth having your accountant run the comparison for your own business.

Illustrative example: A Gold Coast logistics business owns its factory unit, worth about $2m, with $600k owing to a bank. It has fallen behind with the ATO and owes $350k. A 24-month private first mortgage of $1m pays out the bank, clears the ATO debt and leaves a modest working buffer — an LVR of roughly 50%. Interest is capitalised, so there are no monthly repayments. Over the next year and a half the owner brings every lodgment up to date, then refinances to a bank with a clean ATO position. Illustrative only, not a quote or lending policy.

If your ATO position is part of the picture, our page on second mortgages with bad credit or ATO debt covers the alternative where you keep your existing bank loan. When you’re ready, tell us about your situation and a specialist will look at the term that fits.

What happens if the exit takes longer than planned?

Sales campaigns run long, banks ask for one more set of figures, buyers’ finance falls over. The worst response is silence. The best is a call to the lender as soon as you can see the timeline moving, with an updated plan and evidence of progress.

What options exist will depend on the property, how far the exit has progressed and how much equity remains — which is one more reason to borrow only what you need and keep a buffer. Use the secured borrowing power calculator to see how much headroom your property gives you.

See if you qualify for a short-term first mortgage

A well-chosen term starts with a clear conversation. Enquiring doesn’t trigger a credit check, and your details go to a single specialist who reads them properly — they aren’t passed around to a list of lenders.

Describe the property, what’s currently owed against it and how you plan to repay as accurately as you can. The closer your answers are to reality, the more dependable the term and structure you’re offered will be.

Get a straight answer on your plan in about 60 seconds.