How to Secure a Second Mortgage in Australia (2025 Guide)

Thinking of tapping into your property’s equity to fund a business project or manage cash flow? You’re not alone! In 2025, more Australian business owners are turning to second mortgages to unlock capital—whether for business growth, renovations, investments, or to cover short-term expenses.

With property values still strong across cities like Sydney, Melbourne and Brisbane, many business owners now have more equity at their disposal. But here’s the catch—most banks won’t offer second mortgages, largely due to regulatory restrictions and internal lending policies. That’s why knowing where to look and how the process works can save you time and open new funding opportunities.

In this guide, we’ll break it all down for you. You’ll learn exactly how to secure a second mortgage in Australia in 2025, step by step. We’ll also cover when it’s a smart move, common pitfalls to avoid, and which lenders can help—especially when the banks can’t.

What is a Second Mortgage?

A second mortgage is an additional loan secured against a property that already has an existing first mortgage in place. It allows you to access the equity you’ve built up in your property to fund business purposes.

The second mortgage sits behind your first mortgage, meaning your primary lender has the first claim over the property if it is sold or foreclosed. As this carries more risk for the second lender, the interest rates are generally higher than a standard first mortgage.

It’s also important to know that many private lenders are reluctant to provide a second mortgage if the first mortgage is already with another private lender. In these cases, if the current private lender won’t agree to a second mortgage or top-up, a common solution is to refinance and restructure the entire loan with a new lender that can offer both the first and second mortgage facilities combined. Business owners commonly use second mortgages to:

• Access capital for business growth

• Cover cash flow gaps

• Pay tax obligations

• Fund renovations on commercial property

• Seize new investment opportunities

How Do Second Mortgages Work in Australia?

Second mortgages in Australia can be structured in different ways depending on the lender and your funding needs. They are generally available as:

1. A lump-sum loan – You receive an upfront amount, with repayments typically structured as interest-only or with capitalised interest (where the interest is added to the loan balance and repaid at the end of the term). This is the most common structure for second mortgages with private lenders.

2. A line of credit – Less common, but some lenders may offer a revolving facility where you can draw down funds as required. This can be useful for businesses needing flexible access to working capital.

Loan terms typically range from 3 to 12 months, especially with private lenders. This makes second mortgages well-suited for bridging finance, short-term business opportunities, or managing tax liabilities.

How to Secure a Second Mortgage in 2025 – Step-by-Step

1. Assess Your Property Equity

The first step is to determine how much equity you have available in your property. Equity is the difference between your property’s current market value and the amount still owing on your existing mortgage. For example:

• Property value: $1,200,000

• Current mortgage balance: $700,000

• Available equity: $500,000

Most private lenders will allow you to borrow up to 65% to 75% of the property’s value across both the first and second mortgages combined. The exact amount will depend on factors such as property type, location, and your business circumstances.

2. Understand Your Purpose for the Loan

Lenders will want to clearly understand what the funds will be used for. Since second mortgages are used for business purposes, you should be prepared to explain how the funds will support your business goals—whether that’s for expansion, cash flow, paying tax debts, or covering urgent business expenses.

The stronger and clearer your purpose, the more confidence the lender will have in your application.

3. Choose the Right Type of Lender

Traditional banks in Australia rarely offer second mortgages—especially for business purposes—due to regulatory limitations and their unwillingness to sit behind another lender on title.

This is where private lenders come in. Private lenders are generally more flexible, faster to approve, and open to complex or time-sensitive scenarios. However, it’s important to understand that not all private lenders have the same appetite for second mortgages—especially if the first mortgage is already with another private lender.

Each lender has their own criteria. Some will require full financials, tax returns and business bank statements, while others will take a more asset-based approach—focusing mainly on the property value, loan purpose and exit strategy.

If your current first mortgage lender won’t offer a top-up or second mortgage, it’s common to refinance the entire facility with a new lender who is willing to structure the deal as required.

At Innovate Funding, we work closely with a wide network of private lenders across Australia. We understand which lenders are most likely to approve second mortgages in a range of scenarios—and can help structure the deal to suit your business needs.

4. Prepare Your Documents

One advantage of working with private lenders is that the documentation requirements are often simpler and more flexible than with banks. That said, you’ll still need to provide certain key documents to support your application.

Typically, lenders will ask for:

• A recent property valuation or an estimated market value

• A current mortgage statement for your existing loan

• Council rates notice

• Identification (driver’s licence, passport)

• Details on the purpose of the loan (business use only)

• A clear exit strategy (how you intend to repay the second mortgage—such as via refinance, property sale, or incoming business cash flow)

Some lenders may also request:

• Business bank statements

• BAS statements

• An accountant’s letter

• Tax returns (depending on the lender’s requirements)

Each private lender has their own criteria, it’s critical to know which lenders require full financials, and which will approve based on equity, loan purpose and exit strategy alone.

That’s where Innovate Funding can help. We know the market, understand each lender’s appetite, and can assist you in preparing and presenting your application to the right lender—maximising your chances of a fast approval.

5. Apply and Get Approved

Once your documents are prepared and your lender is selected, the application process can move quickly—especially with private lenders.

At Innovate Funding, we can typically secure approval within 24 hours of receiving the required documents. However, it’s important to understand that while many private lenders advertise settlement within 24 hours, this is rarely the case in practice.

There are often unavoidable time delays due to solicitor reviews, legal documentation, PEXA preparation, and general human factors. As a result, realistic settlement timeframes are usually between 5 to 10 business days—and in some cases, up to 2 weeks.

Working with an experienced team like Innovate Funding helps streamline the process, avoid unnecessary delays, and ensure your second mortgage settles as quickly as possible.

6. Settlement and Accessing Your Funds

Once all documents have been signed and settlement is arranged, your second mortgage will be registered on title—sitting behind the existing first mortgage. After registration and settlement are complete, funds will be released and available for use.

If refinancing is required (where both the first and second mortgages are being restructured), the new lender will manage this process as part of the settlement.

At Innovate Funding, we manage this entire process on your behalf—liaising with lenders, solicitors and settlement agents to ensure everything runs smoothly, so you can focus on putting your funds to work in your business.

Example Scenario

A Sydney-based business owner required $120,000 in short-term working capital to manage cash flow and capitalise on a new business opportunity.

The property—a residential asset valued at $1.1 million—already had a first mortgage of $500,000 with a major bank. The client wanted to avoid refinancing the first mortgage and preferred a quick, flexible second mortgage. We secured approval through a private lender for:

• Loan amount: $120,000

• Term: 6 months (with the option to extend if required)

• Interest rate: 14.95% p.a., with interest capitalised

• Fees: 2.5% establishment fee + standard legal and valuation costs

• Total LVR: 55% (including the first mortgage, second mortgage, and all fees)

Approval was achieved within 24 hours. Due to solicitor and PEXA processing times, settlement was completed within 9 business days, giving the client fast access to the capital needed.

This structure allowed the client to proceed without monthly repayments—preserving cash flow and giving them the flexibility to repay the facility upon completing their business project.

Key Things to Know Before You Apply

Interest Rates

Second mortgages are considered higher risk for lenders, as they sit behind an existing first mortgage on title. Interest rates reflect this risk.

In 2025, private lender second mortgage rates generally start at 12.95% p.a. and can range up to 2.5% per month, depending on the property, location, loan size, loan term, and overall risk profile.

While the rate is important to consider, for many borrowers the real value lies in the speed of approval, flexible structuring, and access to funding—especially when addressing time-sensitive business opportunities.

Fees

In addition to interest rates, it’s important to budget for fees when taking out a second mortgage.

Typical fees can include:

• Valuation fees

• Legal fees (yours and the lender’s)

• Lender establishment fees

• Professional fees

• PEXA and settlement agent costs

• Discharge fees when the mortgage is repaid

Private lender fees can vary significantly depending on the lender and the complexity of the deal. A good broker will ensure these are fully disclosed upfront and negotiated where possible.

At Innovate Funding, we take a transparent approach—clearly outlining all fees from day one so you know exactly what to expect.

Risks

Second mortgages also carry risks—so it’s important to go in with your eyes open. Key risks include:

• Your property is the security—if you cannot meet repayments or the agreed exit strategy, the property may be sold to recover the debt.

• Second mortgages can impact your ability to refinance your first mortgage in the future—always consider this when structuring the deal.

• If your first mortgage is with a private lender, adding a second mortgage may not be an option—many lenders will prefer to refinance the entire facility.

That’s why a clear exit strategy, realistic timelines, and professional advice are essential before taking on a second mortgage.

At Innovate Funding, we guide you through the process and help ensure the structure is right for your business.

When is a Second Mortgage a Smart Move?

Second mortgages can be an excellent funding solution for the right scenario—especially for businesses needing short-term capital where traditional bank finance is too slow or unavailable. Some smart uses for second mortgages include:

• Seizing time-sensitive business opportunities

• Funding urgent tax liabilities

• Managing temporary cash flow gaps

• Completing property improvements to boost value

• Refinancing out of an expiring loan

• Bridging finance between major funding events or property sales

When used strategically—with a clear plan and exit—second mortgages can provide the flexibility many business owners need.

When to Be Cautious

While second mortgages offer flexibility, they are not suitable for every situation. Business owners should be cautious if:

• The exit strategy is unclear or uncertain

• Business cash flow may not support repayments

• The loan-to-value ratio is pushed too high, leaving little equity buffer

• There is an over-reliance on refinancing as an exit

• The first mortgage lender may block or oppose a second mortgage

• The property market is softening, potentially reducing the property value

At Innovate Funding, we always ensure that clients fully understand the risks and help structure deals that are achievable and sustainable.

Alternatives to Second Mortgages

In some cases, a second mortgage may not be the most suitable option. Depending on your circumstances, other funding solutions could be more effective, including:

• Refinancing your entire first mortgage to release equity

• Private first mortgage loans

• Caveat loans (unregistered second mortgages)

• Business loans (secured or unsecured)

• Short-term bridging finance

• Joint venture or equity partnership funding

An experienced lending specialist can assess your needs and recommend the right

structure for your business.

Final Thoughts

In today’s market, second mortgages remain a powerful tool for business owners looking to unlock equity and access capital—fast. Whether you’re managing a cash flow gap, paying urgent tax debts, or seizing a time-sensitive opportunity, the key is knowing how to structure the loan correctly and choosing the right lender.

Second mortgages can deliver real value when used strategically—with a clear purpose and an achievable exit plan.

At Innovate Funding, we specialise in helping business owners across Australia secure second mortgages that are tailored to their needs. If you’d like expert advice or want to explore your options, reach out to our team today.