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First and Second Mortgages in Australia: How They Work in 2025
- Innovate Funding
- Feb 13
- 4 min read
Updated: Nov 10
Understanding the Evolving Mortgage Landscape in 2025
As Australia’s lending environment continues to evolve, first and second mortgages have become vital tools for property owners, investors, and business borrowers seeking flexible finance solutions. In 2025, tighter bank lending standards have led more Australians to explore non-bank and private lending options for both first mortgages and second mortgages. These alternatives, offered by lenders like Innovate Funding, provide faster approvals, asset-based assessments, and customised loan structures that adapt to real-world needs.
This guide explains how first and second mortgages in Australia work, their key differences, and how borrowers can benefit from flexible non-bank funding options.
What Is a First Mortgage?
A first mortgage is the primary loan secured against a property. It holds the first legal claim on the asset, meaning the lender is repaid first in the event of a sale or default.
Key Characteristics of First Mortgages
Lowest Risk: Because it holds priority, the first mortgage carries minimal risk for lenders.
Lower Interest Rates: Due to reduced risk, first mortgages generally attract the most competitive rates.
Higher Borrowing Limits: Borrowers can typically access higher loan amounts, as the lender’s security is strong.
Flexible Loan Purposes: Can be used for property purchases, refinancing, or equity release for business or investment.
Explore Innovate Funding’s First Mortgage Loans to learn more about available structures and eligibility.
What Is a Second Mortgage?
A second mortgage is a supplementary loan secured against the same property as the first mortgage but ranking second in repayment priority. This means that if the property is sold, the first mortgage is paid out before the second.
Key Characteristics of Second Mortgages
Higher Interest Rates: Because they are subordinate to first loans, second mortgages often carry higher rates.
Shorter Terms: Many second mortgages are short-term (3–24 months) and used for cash flow, business growth, or bridging finance.
Flexible Access to Equity: Borrowers can unlock property equity without refinancing their first mortgage.
Fast Settlements: Non-bank lenders can approve and fund second mortgages in days, not weeks.
See how Second Mortgage Loans can help you access property equity efficiently.
First vs Second Mortgages: Key Differences
Feature | First Mortgage | Second Mortgage |
Repayment Priority | Repaid first | Repaid after the first mortgage |
Interest Rate | Lower (less risk) | Higher (more risk) |
Loan Term | 3-12 months | 3–12 months |
Purpose | Purchase, refinance, investment | Working capital, bridging, debt consolidation |
Approval Speed | Fast (1–2 weeks) | Fast (1–2 weeks) |
Security Position | First | Secondary |
Understanding these differences helps borrowers determine which loan type aligns with their goals and risk profile.
The Role of Private and Non-Bank Lenders in 2025
In 2025, non-bank and private lenders continue to reshape the Australian mortgage landscape. Unlike traditional banks, these lenders base approvals on asset strength, equity, and exit strategy rather than rigid income verification.
Why Borrowers Choose Non-Bank Lending
Speed: Approvals and settlements can occur within days.
Flexibility: Customised loan structures designed for unique borrower needs.
Accessibility: Suitable for clients with non-standard income, self-employment, or complex financial backgrounds.
Options: Access to bridging loans, second mortgages, and short-term business loans.
Learn more about Private Lending in Australia and why it’s becoming the preferred funding pathway in 2025.
Case Example: Combining First and Second Mortgages
A Sydney-based business owner owned a commercial property valued at $1.5 million with an existing first mortgage of $800,000. To fund renovations and working capital, they applied for a second mortgage through Innovate Funding.
Within one week, the client received $200,000 in funding without disturbing the existing first mortgage. The combined Loan-to-Value Ratio (LVR) remained at 67%, providing a secure structure for both borrower and lender.
This approach allowed the client to access short-term capital for expansion while keeping long-term financing stable.
Advantages of First and Second Mortgages in Australia 2025
Access to Property Equity: Borrowers can release equity to fund new investments or business growth.
Faster Approval: Non-bank lenders offer turnaround times of 48–72 hours.
Flexible Criteria: Asset-based assessment rather than strict credit scoring.
Short or Long-Term Options: Choose between stability (first mortgage) or agility (second mortgage).
Customised Loan Structures: Tailored repayment schedules and exit strategies.
Is a First or Second Mortgage Right for You?
If you’re a business owner, property investor, or developer looking for flexible funding, both first and second mortgages offer unique advantages.
A first mortgage is best for long-term financing and property acquisition, while a second mortgage provides a fast way to access equity without refinancing.
Contact Innovate Funding today to discuss your lending options and find the right mortgage structure for your goals.
Frequently Asked Questions (FAQs)
1. What is the main difference between a first and second mortgage?
A first mortgage is the primary loan on a property, while a second mortgage is secured behind it, allowing borrowers to access additional funds without refinancing.
2. Can I have both a first and second mortgage at the same time?
Yes. Many borrowers use both loans to balance long-term stability with short-term capital access.
3. How quickly can a second mortgage be approved in 2025?
Innovate Funding can issue conditional approval within 24–48 hours and settle most deals within two weeks.
4. What are the typical LVRs for first and second mortgages?
First mortgages often reach up to 80% LVR, while second mortgages typically cap at 65–70% combined LVR.
5. Are non-bank mortgage rates higher than bank rates?
Rates can be slightly higher due to greater flexibility and faster access, but Innovate Funding ensures competitive pricing across all private lending products.
