Private mortgage costs explained: what you pay and when

Ask most people what a loan costs and they’ll quote a single number. With a private secured business loan, that single number tells you surprisingly little. What matters is the total you’ll have paid by the time the loan is repaid — interest, one-off fees, third-party costs and the cost of getting out.

This guide breaks down every cost you can expect, explains how pricing is set for each deal, and shows how prepaid or capitalised interest changes what you actually receive and repay.

How is a private mortgage priced?

There’s no published price list, and that’s deliberate. Every private loan is priced on four things:

• The security — the type of property, where it is and how easily it would sell.
• The LVR — how much is being borrowed (including any debt ahead of the new loan) against what the property is worth.
• The term — how long the money is needed.
• The exit — how certain and how soon the repayment event is.

The position on title matters too. A second mortgage or caveat loan generally costs more than a first mortgage, because the lender ranks behind another lender and carries more risk. Our comparison of first mortgages, second mortgages and caveat loans explains why.

The aim on every deal is the sharpest price the situation allows. A low LVR, quality property and a contracted sale as the exit will price very differently from a high LVR on rural land with a refinance that still depends on a bank saying yes.

What are all the costs, line by line?

Cost	What it covers	When you pay it
Interest	The lender’s return for the funds, priced per deal	Prepaid at settlement or capitalised and repaid at exit, as arranged per deal
Assessment fee	Assessing and setting up the loan; a small fee that varies per loan, shown on the Letter of Offer	As set out in the Letter of Offer
Lender’s legal costs	Preparing loan, mortgage or caveat documents and acting at settlement	Generally at settlement
Your own legal costs	Your solicitor reviewing documents and acting for you	Billed by your solicitor
Land registry fees	Lodging the mortgage or caveat, and later the discharge or withdrawal	At settlement and at exit
Electronic settlement fees	Use of the online settlement workspace	At settlement and at exit
Outgoing lender’s costs	Any discharge fee or break costs charged by a lender being paid out	At settlement, from the advance
Discharge costs	Releasing the private mortgage or withdrawing the caveat when repaid	At exit
Valuation fee	Not applicable — no formal valuation required	—

Land registry fees are set by government regulation. Landgate’s published schedule, for example, lists separate lodgement fees for a mortgage and for each discharge, under regulations that came into force on 1 July 2026. Electronic lodgment network operator fees are also subject to independent pricing oversight; IPART released a draft report on those service fees in July 2026, as ARNECC has noted. Your solicitor will include the current amounts in your settlement figures.

Which factors push your price up or down?

Because pricing follows risk, you have more influence over it than you might think. Here’s how the main factors tend to move things.

Factor	Tends to sharpen the price	Tends to lift the price
Position on title	First mortgage	Second mortgage or caveat
LVR	Low total debt against the property	Total debt close to the limit
Property type	Established residential or well-located commercial	Vacant land, rural or specialised property
Exit	Contracted sale or refinance already in progress	Exit that depends on several things going right
Term	Term comfortably matched to the exit	Term that leaves no buffer
Information	Complete, accurate and supplied early	Late surprises, such as an extra debt on title

Some of these you can’t change — the property is what it is. Others you can. Offering a second property as additional security, borrowing a little less, or getting a sale contract signed before you apply can all improve how a deal is priced. Our page on how much equity you can use shows how LVR is worked out across one or more properties.

Which costs can you reduce or avoid altogether?

A few costs are fixed — registry fees, for instance — but several are within your control:

• The cost of delay. Every day a settlement slips is a day of interest and, often, a missed opportunity. Have ID, payout figures and your solicitor lined up before you accept the offer.
• Borrowing more than you need. Capitalised interest accrues on the whole balance, so a buffer that’s far larger than necessary costs money.
• A term longer than the exit needs — but balance this carefully against the risk of the exit running late.
• Break costs on an existing loan. Ask your current lender about any early repayment costs before deciding whether to refinance it or leave it in place behind a second mortgage.
• A valuation fee. Already gone — no formal valuation is required.

How do prepaid and capitalised interest change the numbers?

On a private mortgage, interest can be prepaid or capitalised (added to the loan), so there may be no monthly repayments during the term. Each option changes your cash flow differently.

Structure	What happens at settlement	During the term	At exit
Prepaid	Interest for the agreed period is held back from the advance, so you receive less than the gross loan	No interest payments	Repay the loan amount plus exit costs
Capitalised	Full advance (less fees and costs) is paid out	Interest is added to the balance	Repay the larger balance plus exit costs

The key point: with prepaid or capitalised interest, the interest still has to fit inside the property’s equity. A lender will look at the total debt including capitalised or prepaid interest, not just the cash you receive. For more on how each works, see prepaid or capitalised interest.

Illustrative example: A Sydney retailer owns a debt-free shop worth around $1m and needs $500k in hand for stock and a fit-out. Illustrative only: if the deal were structured with total debt capped at a 60% LVR, the maximum gross loan would be $600k. With interest capitalised, the retailer receives the $500k (less the assessment fee and costs), and the remaining headroom up to $600k is there to absorb the interest that accrues over the term. With interest prepaid, the gross loan is set so that the prepaid interest and costs are held back at settlement and $500k still reaches the retailer’s account. Either way, the exit — in this case, a planned refinance to a bank — must clear the full gross balance plus discharge costs.

Why doesn’t the cost list include a valuation?

Because there isn’t one. No formal valuation is required — the property is assessed directly. That saves the valuer’s invoice, takes days out of the process, and avoids a conservative valuer figure shrinking the amount you can borrow. Learn more about how much equity you can use under this approach.

Are the costs of a private loan tax deductible?

The answer depends on what the money is used for, and your accountant should confirm the detail for your structure. A few useful pointers from the ATO:

• The ATO’s list of general business operating expenses includes interest on money borrowed to produce assessable income or to purchase income-producing assets.
• The same list includes legal expenses incurred in borrowing money and in discharging a mortgage.
• Prepaid expenses of $1,000 or more usually need to be spread across the period they cover — relevant if you prepay interest across two income years.
• For borrowing expenses such as loan setup fees, the ATO’s guidance for property investors explains they are generally claimed over five years or the term of the loan if shorter, unless the total is $100 or less. Interest is treated separately.
• The general interest charge the ATO levies on overdue tax is no longer deductible if incurred on or after 1 July 2025.

How should you compare two private loan offers?

Don’t compare headline numbers. Compare the total cost from settlement to exit. For each offer, add up:

1. Interest for the realistic term, not the shortest possible one.
2. The assessment or establishment fee.
3. Legal costs on both sides.
4. Registry, settlement and discharge costs.
5. The cost of the exit running late — what happens if you need an extra couple of months?

Then check what you actually receive at settlement. An offer that looks cheaper but holds back more, or settles a week later and costs you the opportunity, isn’t cheaper at all. If you’re weighing whether to keep your bank loan and add a second mortgage, our second mortgage business loans page shows how that changes the total. More answers are on our FAQ page.

Want a real number for your deal? See if you qualify

The only way to know what a private loan will cost you is to have your deal priced. Send a 60-second enquiry and a specialist will look at your property, what’s owing and your exit — no credit check to enquire, and your details aren’t distributed to a string of lenders. Our lending partner fundU then sets out the full cost on a Letter of Offer before you commit to anything.

Accuracy pays off here: give precise details on the property, every debt secured on it and your timeframe, and the figures you receive first will be the ones you can rely on. Get your deal priced.