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How We Structured a $1M Second Mortgage in Brighton, VIC to Fund a Commercial Deposit and Working Capital
- Innovate Funding
- 4 days ago
- 4 min read
In high-value suburbs like Brighton, VIC, time-sensitive property and business opportunities often require capital that traditional banks can’t deliver quickly. In these situations, private lending plays a critical role—enabling business owners to unlock equity rapidly and act decisively.
At Innovate Funding, we recently assisted a Pty Ltd client who needed $1 million urgently to secure a deposit on a commercial property and inject working capital into their business. While their owner-occupied home in Brighton was valued at $5.5 million, their bank was unable to provide funds in the required timeframe.
We provided a tailored private lending solution: a second mortgage in Brighton, structured at 75% Loan-to-Value Ratio (LVR), with a 3-month term and a blended interest rate of 16% per annum. The result? Fast, efficient funding that enabled the client to proceed with confidence—without disrupting their existing mortgage.
Below, we explain how the structure worked, and clarify some of the key financial concepts often misunderstood in private lending.
Deal Overview: Second Mortgage in Brighton
Location: Brighton, VIC
Client Type: Pty Ltd (business owner)
Loan Amount: $1,000,000
Loan Type: Second mortgage
Security: Owner-occupied residential property
Valuation: $5.5 million
Combined LVR: 75%
Term: 3 months
Blended Interest Rate: 16% p.a.
Purpose:
$750,000 for a commercial property deposit
$250,000 for working capital
Exit Strategy: Refinance with a major bank (application in progress)
Why a Second Mortgage?
A second mortgage allows borrowers to access equity in a property that is already subject to an existing mortgage. The second lender registers a legal interest behind the first mortgage, making it a higher-risk position—but also a valuable solution in the right context.
In this case, the client's residential mortgage remained untouched. Our second mortgage sat behind it, releasing the equity required for time-sensitive funding—without triggering a full refinance or forcing a sale.
Understanding LVR (Loan-to-Value Ratio)
Loan-to-Value Ratio (LVR) is a key risk indicator in any property-backed loan. It reflects the proportion of the loan relative to the secured property’s market value.
Calculation: Total Loan Exposure ÷ Property Value × 100 = LVR
In this scenario:
Existing first mortgage + new second mortgage = total exposure
Property value: $5.5 million
Combined exposure: capped at 75% LVR
Traditional lenders typically cap second mortgages at lower LVRs (around 60–65%). However, in private lending—where turnaround speed, security value, and exit strategy are assessed holistically—higher LVRs can be considered, particularly in premium locations like Brighton.
Why Banks Weren’t an Option
Despite the client’s strong equity position, their residential bank was unable to release funds in the timeframe required. This is common in today's lending environment, where:
Bank approvals are process-heavy and time-consuming
Most lenders do not release funds from residential security for commercial purchases
Many banks are unwilling to fund working capital using property equity
Redrawing or refinancing can take 4–6 weeks or more
Given these constraints, private lending offered the client a time-sensitive solution—structured with commercial intent and repaid through a clearly defined refinance plan.
What Is a Blended Interest Rate?
The blended interest rate of 16% p.a. represents the overall cost of funds, inclusive of risk premiums and short-term pricing. This rate is not comparable to a standard home loan, because:
The loan was non-bank and non-code (i.e. not regulated consumer credit)
It was short-term (3 months)
It was in a second mortgage position, with higher risk exposure
Approval and settlement occurred within days
While private lending carries a premium, it is designed to serve strategic, short-term purposes where traditional lending channels fall short.
Loan Purpose: Commercial Deposit + Working Capital
This transaction had two objectives:
$750,000 was allocated for the deposit on a commercial property the client was in the process of acquiring
$250,000 was used to boost working capital within the business during a transitional growth period
This type of dual-purpose lending is common among business owners with equity-rich properties, particularly when needing short-term liquidity to capitalise on opportunities or manage timing mismatches between costs and income.
The Importance of Exit Strategy
Every private loan must have a clearly defined exit strategy. In this case, the client had already begun the process of refinancing their residential and business loans with a major bank.
Our second mortgage was designed to bridge the gap—ensuring the client could move forward with the property purchase and business cash flow needs while the bank completed their internal processes.
The 3-month term aligned with the expected timeframe for refinance, and we remained in close contact with the borrower and their broker to ensure the process remained on track.
When Is a Second Mortgage Suitable?
Second mortgages are particularly useful when:
Significant equity exists in a property
The borrower needs funds quickly
The primary mortgage is at a competitive rate and the borrower doesn’t want to refinance
Funds are needed for non-traditional purposes (e.g., deposits, bridging, working capital)
The exit is clear and verifiable
This structure is especially relevant in suburbs like Brighton, where property values are high, and equity positions are substantial—even if cash flow is temporarily constrained.
Why Choose Innovate Funding?
Innovate Funding specialises in private commercial lending solutions that move at the speed of business. We work with brokers, investors, and business owners to deliver:
Second mortgages
Cross-collateralised structures
High LVR lending (up to 75%)
Non-code, business-purpose facilities
Settlement in days, not weeks
We assess each deal on its merits—focusing on the strength of the asset, the borrower's position, and the clarity of the exit. Our role is to provide efficient, reliable capital that helps our clients seize the right opportunities at the right time.
Unlocking Equity with Purpose
This transaction demonstrates how property equity can be transformed into strategic capital when guided by the right structure. Our client had substantial value locked in their Brighton home—but needed fast access to funding for commercial acquisition and business continuity.
We delivered a tailored second mortgage solution that respected their existing loan structure, released funds quickly, and aligned with their longer-term refinance plan. For borrowers in similar situations, this approach offers an agile, professional pathway to funding when timing and execution matter most.
Need Fast, Flexible Funding in Brighton or Surrounding Areas?
If you're an investor or business owner with property equity and a funding need, we can help. We provide fast, strategic lending solutions for:
Deposit and bridging finance
Non-bank commercial funding
Contact Innovate Funding today to explore how private lending can support your next move.
