How soon after buying a property can you borrow against it?

You settled on a property a few weeks ago. It might be the warehouse the business has wanted for years, an investment unit, or a block of land. Now the business needs funds, and the obvious question is whether you have to wait before you can borrow against what you’ve just bought.

With a private secured lender, generally no. There’s no rule that says you must hold a property for six or twelve months first. What a recent purchase does change is how value is judged, and that has more effect on the amount than the waiting period ever would.

Is there a minimum time you must own a property?

Not for our loans. Once settlement has happened, the transfer is registered and you’re on the title, the property can secure a first mortgage, second mortgage or caveat loan for business purposes.

You may have heard about “seasoning”. Some lenders prefer to wait a period after purchase before they’ll recognise a value higher than the price paid, to guard against inflated valuations soon after a sale. That’s a policy choice, not a legal requirement. A private lender that assesses value itself can look at the property on its merits from day one.

What a lender does care about is why you need funds so soon after buying. That isn’t suspicion; it’s part of understanding the loan. A business that bought premises and then won a contract, or bought a site and now needs to pay for approvals, has a clear story. Being upfront about it in your enquiry, along with how the loan will be repaid, does more for the speed of the answer than any amount of time on the title.

How is value judged on a property you just bought?

This is the real issue. When you bought the property a few weeks ago, a willing buyer and a willing seller agreed a price after the property was marketed. That price is the freshest, most reliable evidence of value there is.

So for a recent purchase, the starting point is what you paid. Borrowing on that basis is straightforward. Borrowing on a higher figure needs a reason, and the reasons that hold up are fairly specific:

Reason value may exceed the price	What helps prove it
Bought below market from a distressed seller	The circumstances of the sale, plus comparable recent sales
Off-market purchase at a negotiated discount	Comparable sales, agent appraisals, the timeline
Improvements completed since purchase	Invoices, photos, approvals and sign-offs
Rezoning, subdivision approval or a new lease since purchase	The approval or signed lease
The market has moved	Usually weak evidence over a few weeks

No sworn valuation is involved: the assessment is done in-house, at no cost to you, and evidence like the above is what moves the figure. As a general guide, the ceiling is 80% of value against residential property and 70% against commercial.

If you’re weighing up whether a recent purchase has enough room, check in with us and we’ll tell you the realistic number.

What has to happen before a new mortgage can be registered?

A lender needs you to be the registered owner, and that depends on settlement paperwork being finished.

• Duty paid. Revenue NSW explains that transfer duty is due by the earlier of settlement or three months after the contract is signed. In most purchases it’s paid at settlement. If duty is outstanding, the transfer can’t be registered, and neither can a mortgage behind it.
• Transfer registered. Electronic settlement usually lodges the transfer on the day. Once it’s registered, the title shows you as owner.
• Certificate of title control. In Victoria, Land Use Victoria explains that where there’s a mortgage, the mortgagee manages the electronic certificate of title until it’s discharged. If your bank lent on the purchase, that’s one reason its consent matters for a second mortgage.
• Special tenures. In the ACT, land is held under Crown lease. ACT Planning notes that a lease holder may not be able to borrow money until the lease has been granted or transferred into their name, so newly purchased ACT land needs that step completed first.

Does it matter whether you bought in a company or trust name?

The timing answer is the same, but the paperwork grows. If a company or the trustee of a trust bought the property, the lender will want to see who controls the entity and who can sign for it, and directors or trustee directors will usually guarantee the loan. For a newly set-up entity that bought its first asset, that means the company extract, the trust deed and any deed of appointment, all checked against the names on the title.

The one trap specific to new structures is a mismatch. If the contract was signed in one name and the title registered in another, or a trust was set up after the contract, fix the record before applying. A lender can only take security from the registered owner, and a mismatch that seemed trivial at settlement can add days to a loan. Our page on company or trust owned property explains what each structure needs.

Should you borrow at settlement instead of after it?

If you know before settlement that the business will need funds, it’s usually better to build them into the purchase rather than come back later. The new loan settles at the same time, the funds are available straight away, and you avoid a second round of legal work.

That works for funding the purchase itself, too. If a bank’s approval is short or late, a private loan can cover the gap so you settle the purchase on time, and our page on property deposits covers funding a deposit against other property. If you bought at a discount, our page on mortgagee sale purchases explains how those buys are funded.

Illustrative example

Illustrative only. The business and figures are invented.

A Newcastle electrical contractor buys a small industrial unit for $1.1m, funded with $500k of savings and a $600k bank loan. Six weeks after settlement, the business wins a large commercial job that needs $180k for switchboards and cable before the first progress claim.

The bank says it won’t look at an increase until the unit has been held longer. The owner applies for a private second mortgage instead. The lender treats the $1.1m purchase price as the value. With $600k owing to the bank, there’s room for the $180k behind it, subject to the bank’s consent. The bank consents within the week, the loan settles, and interest is capitalised for the first 6 months, so there are no repayments while the job is delivered.

Twelve months later, with the job paid and the unit fully leased, the owner refinances both loans into one longer-term bank facility. Our loans run on open terms, so repaying at that point attracts no penalty.

What should you have ready?

• the contract of sale and settlement statement from the purchase;
• evidence that duty was paid and the transfer registered (your conveyancer can confirm);
• the latest statement for any loan used to buy the property;
• anything that supports a higher value, if you’re relying on one;
• ID for each owner and entity documents if a company or trust holds the property.

Just bought and need funds now? See if you qualify

Buying a property is a big step, and it’s frustrating to be told the asset you’ve just paid for can’t help the business for another year. With a private lender, it often can.

Our quick loan check takes about 60 seconds, and finding out costs your credit file nothing: there’s no credit check to enquire. Your enquiry goes to one direct lender, not a pile of lenders, and a specialist looks at the property and calls you. Tell us the price you paid, when you settled and what’s owing, as accurately as you can, so the figure we give you holds up.

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