$450,000 Second Mortgage in St Kilda: A Private Lending Case Study

Accessing equity quickly can be challenging when a property already has a first mortgage in place. This is a common issue for property owners and business owners in St Kilda who need capital but want to avoid refinancing their existing loan.

In this case study, we outline how a $450,000 second mortgage was structured through private lending, delivering fast access to funds while keeping the first mortgage in place.

The Borrower Scenario

The borrower owned a well-located residential property with an existing first mortgage held by a major lender. While the property had strong equity, refinancing the first mortgage was not ideal due to:

• A competitive existing interest rate

• Potential break costs

• Tight timeframes

• The need for a flexible, short-term funding solution

The borrower required $450,000 for business purposes, making a second mortgage the most practical option.

Why a Second Mortgage Was the Right Solution

A second mortgage allows a borrower to unlock equity without disturbing the existing first mortgage.

In this scenario, the key benefits included:

• Faster approval than a full refinance

• No disruption to the existing lender

• Equity assessed based on property value, not income

• Flexible structuring through private lenders

This type of funding is commonly arranged through second mortgage lending, particularly where speed and certainty matter.

How the $450,000 Second Mortgage Was Structured

Rather than relying on traditional serviceability, the private lender assessed the deal based on property value, combined loan-to-value ratio, and exit strategy.

Key Loan Terms

• Loan amount: $450,000

• Security: Second mortgage over residential property

• Combined LVR: 70%

• Interest rate: 1.75% per month

• Loan term: 12 months

• Repayments: Interest capitalised

• Full Valuation

• Purpose: Business use

• Exit strategy: Refinance or payout at maturity

Because the loan was written for a genuine business purpose and secured by property, full income verification was not required. This is common within private lending in Australia, especially for second mortgage transactions.

Why Banks Typically Don’t Offer Second Mortgages

Most major banks are unwilling to take second mortgage positions, particularly when:

• Another lender controls the first mortgage

• The loan is for business purposes

• Speed is required

• Serviceability does not meet standard policy

As a result, borrowers often turn to secured business loans and private lenders to access equity in these situations.

When a Second Mortgage Makes Sense

A second mortgage may be appropriate when:

• You have strong equity but want to keep your first mortgage

• The funding requirement is short-term

• Speed and certainty are priorities

• You have a clearly defined exit strategy

• The loan is for a legitimate business purpose

In established property markets like St Kilda, second mortgages are commonly used as a strategic, short-term funding solution.

When a Second Mortgage May Not Be Suitable

Second mortgages may not be appropriate if:

• The combined LVR is too high

• The funding is required long-term

• There is no clear exit strategy

• The property does not have sufficient equity

A proper assessment is essential before proceeding.

Frequently Asked Questions About Second Mortgages in St Kilda

What is a second mortgage?

A second mortgage is a loan secured against a property that already has a first mortgage in place. The second lender sits behind the first lender on title and is repaid after the first mortgage.

Can I get a second mortgage without refinancing my first loan?

Yes. One of the key advantages of a second mortgage is that it allows you to access additional equity without replacing or refinancing your existing first mortgage. This is particularly useful when your current loan has a competitive rate or break costs.

What LVR is acceptable for a second mortgage?

Most private lenders will assess second mortgages based on the loan-to-value ratio (LVR). In this case, the loan was structured at 70% LVR, which is within acceptable private lending parameters.

Are second mortgages only available through private lenders?

In most cases, yes. Major banks generally do not offer second mortgage facilities. Second mortgages are typically arranged through private or non-bank lenders as part of broader private lending solutions.

How quickly can a second mortgage be approved?

Approval timeframes are usually much faster than traditional bank refinancing. Depending on the valuation and legal process, second mortgages can often be arranged within days rather than weeks.

What are common exit strategies for second mortgages?

Typical exit strategies include refinancing once income improves, sale of the property, sale of a business asset, or repayment from another funding source. Short-term structures are often aligned with short term business loans.

How Innovate Funding Can Help

At Innovate Funding, we specialise in private second mortgage solutions across Melbourne and Australia. We work with a wide panel of private lenders to structure second mortgages that align with your equity position, risk profile, and exit strategy.

If you are considering a $450,000 second mortgage in St Kilda, structured at 1.75% per month over a 12-month term at 70% LVR, our team can provide a clear and efficient assessment. Speak with a specialist today to discuss your second mortgage options.