How to work out the total cost of a short-term secured loan

Two borrowers can sign identical loans and end up paying very different amounts. One repays in five months from a sale that went to plan. The other waits eleven months for a refinance that kept asking for one more document. Same lender, same Letter of Offer, very different bill.

That’s the thing about short-term secured lending: the cost isn’t really set on the day you sign. It’s set by how long you keep the money and how cleanly you get out. This guide shows you how to add up the true total, using a method you can apply to any offer. If you want the definitions of each fee first, start with private mortgage costs explained.

What does “total cost” mean on a short-term loan?

Think of it as the full bill from the day funds land to the day the lender’s mortgage or caveat comes off your title. It has two families of cost:

Type	Examples	How it behaves
Time-based	Interest	Grows with every month the loan is open
Fixed, at the start	Assessment fee, lender’s and your legal costs, registry and electronic settlement fees, any payout costs on an existing loan	Paid once, regardless of how long you keep the money
Fixed, at the end	Discharge or caveat withdrawal, related legal and settlement costs	Paid once, when the loan is repaid

Written as a simple formula:

Total cost = interest for the time used + start-up costs + exit costs

Everything else in this guide is about estimating each part honestly.

Why is the term the biggest lever on cost?

Because fixed costs are, well, fixed. The assessment fee doesn’t change whether you repay in four months or twelve. Interest does. So the most important input into your estimate isn’t the fee schedule — it’s your realistic exit date.

Private first mortgages are available for terms of 1 to 24 months, and second mortgages and caveat loans are typically shorter. The term sets the latest date you can repay; your exit sets the actual date. Cost the loan to the actual date, then check what happens if it slips. Our guide to short-term first mortgages explains how the term is chosen around the exit.

What does a full cost calculation look like?

Illustrative example: A Hobart joinery business borrows $500,000 on a private first mortgage over its factory to fund a large fit-out contract, with interest capitalised. Every figure below is a round illustrative number, not a quote — your Letter of Offer sets the actual amounts.

Item	Exit at 6 months	Exit at 12 months
Interest over the period actually used	$30,000	$60,000
Assessment fee	$7,500	$7,500
Lender’s legal costs	$3,000	$3,000
Joinery’s own solicitor	$2,000	$2,000
Registry and settlement fees, in and out	$1,000	$1,000
Total cost to exit	$43,500	$73,500

Look at where the difference comes from. The fixed items total $13,500 in both columns. The entire $30,000 gap between the two outcomes is time. If the contract pays in month six and the business repays promptly, it saves more than the assessment fee and every legal bill combined.

How do prepaid and capitalised interest change the sum?

They don’t change what interest costs; they change when you pay it and how much cash you actually receive.

• Prepaid: interest for the agreed period is held back at settlement. You receive less cash, so to net the same $500,000 you borrow more. Ask what happens to unused prepaid interest if you repay early.
• Capitalised: you receive the full advance less costs, and interest is added to the balance. Your payout figure at exit includes it. The longer you keep the loan, the bigger that figure.

A useful habit is to calculate cost per dollar actually received: total cost to exit divided by the net cash that reached your account. That number lets you compare a prepaid offer with a capitalised one fairly. Our capitalised interest worked example shows the month-by-month balance, and prepaid or capitalised interest explains how each is set up.

Which costs do people forget to count?

• Registry fees at both ends. In Western Australia, Landgate’s schedule from 1 July 2026 lists $225.10 to lodge a mortgage and $225.10 per discharge, with the same figures for lodging and withdrawing a caveat. Other states set their own fees.
• Payout costs on an existing loan. If the new loan refinances a bank, the bank may charge a discharge fee or break costs. Ask before you commit.
• Your own solicitor. It’s tempting to leave this out because it’s not on the lender’s offer. It’s still part of the total.
• The cost of delay at settlement. If a document isn’t ready and settlement is rebooked, the opportunity the loan was meant to fund may cost you more than any fee.
• Exit costs that belong to the exit, not the loan. Agent’s commission and marketing on a sale, or a bank’s fees on a refinance, reduce the proceeds that repay the loan. Keep them in a separate column, but don’t forget them.

There’s also one cost you won’t see. With no formal valuation required, no third-party report fee is added to your total, and no settlement date hangs on a report arriving. On a short loan, removing even a week of waiting can matter more than the fee itself, because the purchase, contract or deadline you’re chasing may not wait for anyone.

What happens to the total if you repay early or need longer?

Repaying early usually reduces interest, but how much depends on your loan terms. Some loans have a minimum interest period; prepaid interest may or may not be adjusted. Ask, and get the answer in writing on your Letter of Offer. Our Letter of Offer explained guide shows where to look.

Needing longer adds interest at a minimum, and an extension is a fresh decision for the lender rather than an automatic right. Ask early how extensions are handled and priced; loan term extensions covers what lenders look for. Build your estimate with a buffer month or two, so a short slip doesn’t blow out the numbers.

If you’d like real figures on your deal rather than illustrations, request an indicative offer with a 60-second enquiry.

Is borrowing cheaper than not borrowing?

The honest comparison isn’t “loan versus nothing”. It’s “loan versus what happens without it”.

Without the loan	Typical consequence
ATO debt left running	General interest charge compounding daily, non-deductible if incurred from 1 July 2025
Purchase settlement missed	Possible default under the contract and loss of the deal
Property sold in a hurry	A discounted price to get a quick sale
Large contract turned down	The profit on that contract, and possibly the client
Supplier and wage pressure	Lost trade terms, staff and reputation

Sometimes the right answer is still not to borrow. But a fair comparison uses dollars on both sides of the ledger. If tax debt is your situation, compare carefully with an ATO payment plan.

How do tax rules affect the after-tax cost?

Your accountant has the final word, but three ATO points are worth knowing before you speak with them:

1. Interest: the ATO lists interest on money borrowed to produce assessable income among deductible business operating expenses.
2. Legal costs: the same ATO list includes legal expenses for borrowing money and discharging a mortgage.
3. Borrowing expenses: the ATO’s guidance for property investors says costs such as loan establishment fees are generally claimed over five years or the term of the loan, whichever is shorter, unless the total is $100 or less. If the loan is repaid early, the remaining balance can be claimed in the final year.

A short-term loan often means the borrowing expenses are claimed over a short period, which helps the after-tax cost.

Key terms at a glance

• Total cost to exit: everything paid from settlement until the security is discharged.
• Time-based cost: interest, which grows the longer the loan is open.
• Fixed cost: fees and legal costs paid once regardless of term.
• Payout figure: the amount the lender needs to release its security on the exit date.

Want your real total? See if you qualify

The fastest way to stop estimating is to have your deal priced. Tell us about the property, every debt already registered on it, how much you need and the event that will repay the loan.

Enquiring doesn’t trigger a credit check, your details aren’t fanned out to a list of lenders, and a specialist at fundU, the direct lender behind this site, reviews it personally. Give us accurate figures for the property and what’s owing, and the costs on your Letter of Offer will line up with the numbers you plan around. Get a priced answer for your loan.