Quick answer
A private mortgage is a business loan from a non-bank lender secured by a mortgage over your property, registered at the state land titles office, or protected by a caveat. You keep ownership: the mortgage is a charge over the land, not a transfer of it. A private mortgage lender offers first mortgages, second mortgages and caveat loans, then discharges the security when the loan is repaid.
Key points
- A mortgage is a charge over your land, not a transfer: you stay the owner
- First mortgages, second mortgages and caveat loans, from $20k to $5m
- Mortgages are lodged electronically, and generally rank in the order they're lodged
- When you repay, the lender signs a discharge and the title is cleared
- Amounts
- $20k – $5m
- Products
- First, second and caveat
- Term
- 1 to 24 months (first mortgage)
- Assessment
- No formal valuation required
Choosing a private lender is one decision. Understanding the mortgage you’re about to sign is another, and it’s the one most borrowers skip. This page is about the mortgage itself: the three products, the paperwork behind them, how they get onto your title, and how they come off again when you repay.
What is a private mortgage, legally speaking?
Western Australia’s Landgate puts it in one line that applies across the country: a mortgage operates as a charge against the land and not as a transfer. The lender (the mortgagee) holds an interest in the land, not ownership of it. You remain the registered owner throughout.
What the charge gives the lender is a right to recover the debt from the property if the loan isn’t repaid. Everything else in a private mortgage, from the term to how interest is handled, sits in the loan agreement and the Letter of Offer.
Key terms
- Mortgagor: the owner who gives the mortgage (you, your company or your trust).
- Mortgagee: the lender who holds it.
- Registered mortgage: a mortgage recorded on the title at the land titles office. See registered mortgage.
- Caveat: a notice on the title protecting a claimed interest, used for caveat loans.
- Discharge: the document that removes the mortgage when the loan is repaid. See discharge of mortgage.
First, second or caveat: which private mortgage product is which?
| First mortgage | Second mortgage | Caveat loan | |
|---|---|---|---|
| What goes on the title | A registered mortgage, ranking first | A registered mortgage, ranking behind an existing one | A caveat, not a mortgage |
| Existing lender | None, or paid out at settlement | Stays in place and ranks ahead | Stays in place |
| Existing lender’s involvement | Provides a payout figure if being refinanced | Its consent may be needed, and its position is considered | Usually none at the outset |
| Typical term | 1 to 24 months | Typically shorter | Typically shorter |
| How it ends | Discharge of mortgage | Discharge of mortgage | Withdrawal of caveat |
| Relative cost | Lowest | Higher | Higher |
| Product page | Private first mortgages | Second mortgage business loans | Caveat loans |
Two features change how these products work in practice. First, interest can be prepaid or capitalised, so a private mortgage can run with no monthly repayments; see prepaid or capitalised interest. Second, a caveat loan can later be converted to a registered second mortgage, which is how a fast, short loan becomes a firmer one if the term needs to run on.
How do private mortgages rank against each other?
Priority is the whole point of a mortgage, so it’s worth getting right. Queensland’s Land Title Act, as set out in Titles Queensland’s practice manual, says instruments must be registered in the order they are lodged, and registered instruments have priority according to when they were lodged, not when they were signed. The other states work on the same principle.
That’s why a mortgage lodged after your bank’s sits second, and why second mortgages generally cost more: if the property is sold, the first mortgagee is paid before the second.
Mortgagees can change the order by agreement. In Queensland that’s done with a Form 30 Mortgage Priority, which must be signed by all affected mortgagees; elsewhere a deed of priority does the same job. For the full picture, read how second mortgages rank and first mortgagee consent.
How is a private mortgage documented?
A properly run private mortgage has a paper trail you can follow from offer to discharge.
| Document | Who prepares it | What it does |
|---|---|---|
| Letter of Offer | Lender | Sets out amount, term, interest arrangement, fees and conditions. See Letter of Offer explained |
| Loan agreement | Lender’s solicitors | The contract: obligations, default terms, early repayment |
| Mortgage | Lender’s solicitors | The instrument lodged at the titles office to create the registered security |
| Standard terms | Lender | Many lenders register their standard mortgage terms once and refer to them in each mortgage |
| Guarantee | Lender’s solicitors | Often signed by directors when a company or trust borrows |
| Caveat | Lender’s solicitors | For caveat loans, lodged instead of a mortgage |
| Payout letter and discharge | Lender | Issued when you repay, to clear the title |
Western Australia shows how standardised this has become. Landgate’s guide says long-form mortgages are no longer accepted there for new mortgages; lenders with large volumes lodge their contractual terms as a memorandum of common provisions and refer to it in a short-form mortgage.
Have your own solicitor go through the loan agreement with you, especially default provisions, early repayment terms and any guarantee. Our guide to documents for a private mortgage lists what you’ll be asked to provide on your side.
How does a private mortgage get registered?
Almost entirely electronically now.
- Western Australia: since 1 December 2018, eligible stand-alone mortgages must be lodged electronically.
- Victoria: Land Use Victoria lists three electronic lodgment networks, with PEXA handling nearly all instrument types; mortgages, discharges and caveats are typical electronic dealings.
- At settlement: on PEXA, funds are exchanged electronically and eligible documents are lodged with the land registry as part of the same settlement, following a financial settlement schedule each party can review in advance.
In practice, that means the moment your loan funds is also the moment the mortgage is lodged. There’s no gap where money has moved but the security hasn’t, which protects both sides. Our guide to what happens at settlement walks through the day itself.
How does discharge work when you repay a private mortgage?
Getting the mortgage off the title is as important as getting it on.
- Request a payout figure from the lender, showing principal, any capitalised interest and fees to the payout date.
- Arrange the funds, from a sale, a refinance or business cash.
- The lender signs the discharge. In Western Australia every mortgagee must join in and sign a discharge. In Queensland the mortgagee signs a release, which then has to be lodged.
- The discharge is lodged, usually electronically at the same settlement where the payout funds arrive.
- The title is clear of that mortgage. For a caveat loan, the caveat is withdrawn instead.
Discharges don’t have to be all or nothing. Landgate’s guide describes a partial discharge as to land, which releases one property while the debt stays secured on the rest, and a partial discharge as to money, which reduces the amount secured. That flexibility matters when a loan is spread across several properties and you sell one. See multiple properties as security and paying out a second mortgage early.
How does a private mortgage run from enquiry to registration, step by step?
- Enquiry. A 60-second form covering the property, what’s registered on it and the purpose. No credit check at this stage.
- Specialist review. A real person looks at the title position and the exit, then calls you.
- Product choice. First mortgage, second mortgage or caveat, depending on what’s already on the title and how long you need the funds.
- Letter of Offer. Amount, term, interest arrangement, fees and conditions, in writing.
- Loan documents. The lender’s solicitors prepare the loan agreement, mortgage or caveat, and any guarantee. Your solicitor reviews them with you.
- Existing lender. If a bank is being paid out, it provides a payout figure; if it’s staying, any consent it needs is arranged.
- Settlement and lodgement. Funds move and the mortgage is lodged electronically in the same settlement.
- Term, then discharge. You carry out the exit, repay, and the discharge clears the title.
What should you check in a private mortgage before you sign?
Most problems with private mortgages trace back to something in the documents the borrower didn’t read. Go through these with your solicitor:
| Check | Why it matters |
|---|---|
| The lender’s name on the Letter of Offer | You should know exactly who holds the mortgage |
| Every fee, and when it’s payable | Fees should match the Letter of Offer, with no surprises at settlement |
| How interest is paid: monthly, prepaid or capitalised | Capitalised interest grows the balance you repay at the end |
| The maturity date | It should give your exit enough time, with a buffer |
| Default terms | What triggers default, and what changes if it happens |
| Early repayment terms | Whether repaying ahead of time costs anything |
| Who must sign | Every owner, and any guarantor, must sign; check nobody is missing |
| Which properties are secured | Especially if more than one title is involved |
If the exit looks tight, the exit strategy guide helps you test it, and the loan term extensions guide explains what happens if you need longer.
Who suits a private mortgage, and who doesn’t?
Well suited:
- business owners with property equity and a short-term need;
- borrowers who want to keep an existing bank loan and add a second mortgage behind it;
- companies and trusts that hold property and need funds quickly;
- anyone whose bank has said no on policy rather than on the property.
Not suited:
- long-term borrowing with no plan to refinance or sell;
- personal or household purposes;
- situations with little equity left after existing debts.
What does a private mortgage cost?
There’s no single published price, because no single price fits. Each loan is priced on its security, LVR, term and exit, and the aim is the sharpest price your situation allows. First mortgages generally cost less than second mortgages and caveat loans, because the lender ranks first.
The cost components are interest, an assessment fee that varies per loan and appears on your Letter of Offer, and legal and registration costs. No formal valuation required, so there’s no report fee to add. See private mortgage costs explained.
Illustrative example: a Newcastle electrical contractor needs $500k to fund a hospital fit-out contract. Its two directors own a house worth about $1.2m with $450k owing to a bank, and a debt-free investment unit worth about $600k. Illustrative: rather than disturb the bank, the lender takes a second mortgage over the house and a first mortgage over the unit for one $500k loan, with total debt across both properties of $950k, an LVR of about 53%. Seven months later the directors sell the unit; a partial discharge releases it at that settlement, the sale proceeds pay down most of the loan, and the rest is repaid from the contract’s final payment two months after that.
See which private mortgage fits your property
Tell us what you own, what’s already registered on it and what the funds are for. That’s enough for a specialist to say whether a first mortgage, a second mortgage or a caveat suits, and what the paperwork will look like. Your enquiry doesn’t involve a credit check, and it isn’t passed around a panel; our lending partner fundU assesses and funds it directly.
Accurate answers about the property and existing debts are what make the first answer the right one.
Ask about a private mortgage in about 60 seconds, or compare options in secured business loans before you send your enquiry.
Frequently asked questions
If I take a private mortgage, do I still own my property?
Yes. A mortgage operates as a charge against the land, not a transfer of it, so the title stays in your name, your company's or your trust's. The lender holds an interest that lets it recover the debt from the property if the loan isn't repaid.
Will a private mortgage show up when someone searches my title?
Yes. A registered mortgage, and a caveat, both appear on the title. A buyer, a bank or another lender who searches will see it, which is exactly how the lender's interest is protected.
My bank already holds the first mortgage. Can a private lender register a second mortgage behind it?
Usually, yes. A second mortgage is registered behind the bank's, and your existing mortgage terms may require the bank's consent first. Our guide to first mortgagee consent explains when it's needed and how to ask for it without disturbing your bank loan.
My loan is secured on two properties and I'm selling one. Do I have to repay the whole loan?
Not necessarily. Titles offices allow a partial discharge, where one property is released while the debt stays secured on the other. Whether the lender agrees depends on how much equity remains in the property still securing the loan.
Who prepares the mortgage documents, and do I need my own solicitor?
The lender's solicitors prepare the loan agreement and mortgage. You should have your own solicitor review them with you before you sign, particularly the default terms, the fees and any guarantees.
Do I have to go to a titles office to sign or register anything?
No. In most cases the mortgage is lodged electronically through an electronic lodgment network such as PEXA, by the lawyers acting on the loan. Your part is signing the documents and completing identity checks.
Is a caveat loan a private mortgage?
Loosely, yes, but technically it's different. With a caveat loan, the loan agreement gives the lender an interest in the property and a caveat on the title protects it; no mortgage is registered at first. A caveat loan can later be converted to a registered second mortgage.
Two lenders hold mortgages over my property. Can they agree to swap who ranks first?
Yes. Mortgagees can change their order of priority by agreement. In Queensland, for example, a Form 30 Mortgage Priority is registered and signed by all affected mortgagees. Elsewhere this is often done through a deed of priority.
Can I repay a private mortgage before the end of the term?
Usually, yes. Early repayment terms are set out in your Letter of Offer and loan documents, so check them before you sign. You'll need a payout figure from the lender, and the discharge is lodged when the loan is repaid.
What happens if I miss the maturity date on a private mortgage?
The loan falls into default, which can mean default interest and, if nothing changes, enforcement against the property. Speak to the lender before the date passes; an extension or refinance is far easier to arrange early than after a default notice.
Can my company or family trust be the borrower on a private mortgage?
Yes. Companies and trusts commonly borrow and give mortgages. Directors usually sign for a company, the trustee signs for a trust, and the trust deed is checked to confirm the trustee has power to borrow and mortgage.