What Is a Non-Bank Loan Secured on Property?

A non-bank loan secured on property is a loan written by a non-bank lender, with Australian real estate registered as the formal security for the debt. The borrower retains ownership and use of the property throughout the term, and the lender holds a registered legal interest (a mortgage or caveat) on the title that gives them recovery rights in the event of default. This is the structural foundation of non-bank lending in Australia: real property is the underlying collateral, and the borrower's repayment promise is backed by a tangible, valuable asset.

This guide explains what a non-bank property-secured loan actually is, how the security mechanism works, what types of property qualify, the difference between a registered mortgage and a caveat, and the practical implications for borrowers. You will find indicative pricing, three real Australian examples across residential, commercial, and development security, and a clear framework for understanding what you are actually agreeing to when you sign a property-backed loan.

What Is Property Security?

Property security is the legal mechanism by which a lender secures their loan against a specific real estate asset. The borrower grants the lender a registered legal interest in the property, recorded on the certificate of title with the relevant state land registry. While the loan is on foot, that interest restricts the borrower's ability to sell, transfer, or further encumber the property without the lender's consent. When the loan is repaid in full, the lender discharges their interest and the property returns to unencumbered ownership.

This is the same mechanism a major bank uses for a residential mortgage. The structural difference between a bank loan and a non-bank loan secured on property is the lender, not the security. The legal framework, the registration process, and the borrower's rights and obligations are functionally identical. What changes is the underwriting approach, the rate, the speed, and the flexibility.

How a Non-Bank Property-Secured Loan Works

The end-to-end process runs through five stages:

1. Application and indicative offer. Borrower provides property details, loan amount, purpose, and exit. Lender issues an indicative letter of offer with rate, LVR, term, and conditions.

2. Property valuation. Panel valuer attends and delivers a short-form valuation. Confirms the security value and the LVR.

3. Loan documents and security registration. Borrower signs loan documents and a mortgage instrument or caveat. The security is lodged with the state land registry.

4. Settlement and funds release. Funds advanced to the borrower (net of fees) once the security is registered. Borrower has full use of the property throughout the term.

5. Discharge at exit. Borrower repays the loan via sale, refinance, or operating cash flow. Lender discharges the mortgage or withdraws the caveat from the title. Property returns to unencumbered status.

Mortgage vs Caveat: Two Forms of Property Security

Australian property security splits into two main forms:

• Registered mortgage: A formal, registered legal instrument. First or second ranking depending on existing mortgages. Provides strong recovery rights via power of sale. Used for first mortgage and second mortgage loans. Settlement typically 7–15 business days.

• Caveat: A non-registered notice on title that prevents further dealings without the caveator's consent. Faster to lodge but weaker on recovery, requiring court action to enforce. Used for short-term caveat loans of 1–6 months. Settlement typically 5–10 business days.

Mortgages are the standard structure for term lending of 6–24 months. Caveats are used for ultra-short bridging needs or where the senior lender will not consent to a registered second mortgage. Both are recognised under each Australian state's land titles legislation and have been used as security mechanisms for decades.

Property Types That Qualify

Non-bank lenders accept a wider range of property types as security than major banks:

• Residential property: Houses, units, townhouses, and strata across all Australian states. Metropolitan capital city residential attracts the highest LVRs (70%–80% on first mortgage).

• Commercial property: Offices, retail, industrial, warehouses, factories, medical, childcare, and hospitality. LVRs 55%–70% depending on tenancy and asset class.

• Mixed-use property: Combined commercial and residential where the residential weight typically lifts the LVR.

• Development sites: With or without DA. LVRs 50%–65% depending on planning status. See land development loans.

• Rural and regional property: Acceptable at conservative LVRs (50%–60%) reflecting smaller buyer pools and longer marketing periods.

• Vacant land: Acceptable in metropolitan and outer-metropolitan locations at LVRs of 50%–60%.

Costs and LVR Caps in 2026

Indicative 2026 ranges:

• First mortgage rates: From 6.95% p.a. on prime non-bank residential. From 8.95% p.a. on specialist private. Up to 13.0% p.a. on credit-impaired commercial.

• Second mortgage rates: From 1.10% per month on prime metro residential with major bank senior. Up to 1.95% per month on commercial or credit-impaired files.

• Caveat loan rates: From 1.50% per month for 1–6 month bridging. Up to 2.25% per month on shorter or more complex files.

• Loan sizes: $50,000 to $20 million across the property-backed product range.

• Term: Caveat 1–6 months. Mortgage 6–36 months.

• Establishment fees: 0.50%–2.5% depending on product and lender.

Real-World Examples of Non-Bank Property-Secured Loans

Sydney residential first mortgage: $1.4M, 24 months

A Sydney property investor needed $1.4 million to refinance an expiring bank loan against a $2.6 million investment property. Bank declined the renewal. Innovate Funding wrote a $1.4 million non-bank first mortgage at 9.45% p.a., interest-only over 24 months, secured by registered first mortgage. Settled in 12 business days. Borrower retained full use of the property throughout, refinanced to a major bank at month 22 once the trading entity restructure completed.

Melbourne commercial second mortgage: $850K, 18 months

A Melbourne medical practice needed $850,000 of equity release for fit-out and equipment. Existing $1.8M senior bank commercial loan. Innovate Funding wrote an $850,000 second mortgage at 1.55% per month, capitalised, over 18 months, secured by registered second mortgage with senior bank consent. Practice continued operating from the premises throughout. Loan paid out by bank consolidation refinance at month 17.

Brisbane caveat: $300K, 90 days

A Queensland trader needed $300,000 in 7 business days to settle a separate property purchase. Existing senior bank mortgage on an investment property would not consent to a second registration. Innovate Funding wrote a $300,000 caveat at 1.85% per month, capitalised, over 90 days, lodged on the title. Trader retained full use of the property. Caveat paid out by the asset sale at day 88, withdrawn from title same day.

Borrower Rights and Lender Recovery

Property security is a legal contract with defined rights on both sides:

• Borrower rights: Full use and quiet enjoyment of the property throughout the term. Right to sell or refinance subject to lender consent. Right to discharge the security on full repayment.

• Lender recovery on default: Power of sale under the registered mortgage. The first mortgagee acts first, with proceeds applied to senior debt, then second mortgage, then any surplus to the borrower. Caveat enforcement requires court action.

• Notice and remediation requirements: Lenders cannot exercise power of sale without first issuing default notices and providing reasonable cure periods. Specific notice periods are governed by each state's mortgage legislation.

• Fair dealing obligations: On sale, the lender must obtain market value for the property, with proceeds applied transparently to debt and costs. The ASIC credit licence framework governs fair dealing on consumer-facing files. Business-purpose lending operates under broader corporate and conduct rules.

How Non-Bank Property Lending Differs From Banks

The legal mechanism is identical, but the operating model differs in five practical ways:

• Funding source: Non-bank lenders fund through wholesale capital, RMBS, and private credit pools rather than retail deposits. The APRA non-bank financial institutions framework describes the regulatory position.

• Underwriting: Banks weight serviceability heavily. Non-bank lenders weight property security and exit strategy more.

• Speed: Banks 6–10 weeks. Non-bank 7–15 business days.

• Documentation: Banks require full income evidence. Non-bank accepts low-doc and no doc structures on stronger security.

• Pricing: Bank prime 6.50%–8.50% p.a. Non-bank prime 6.95%–8.50% p.a. Specialist non-bank 8.95%–13.0% p.a. Second mortgage 1.10%–1.95% per month.

How to Apply

Standards align with the business.gov.au borrowing guide. Lenders expect:

• Property details: Address, recent rates notice, current senior mortgage statement.

• Loan amount and purpose: Specific dollar request and a written explanation.

• Exit strategy: Refinance pre-approval, sale contract, business cash flow projection, or asset disposal plan.

• Borrower documents: ID, ATO portal printout, recent bank statements, trust deed where applicable.

Frequently Asked Questions

Is my property at risk if I take a non-bank secured loan?

The same way it is at risk with a bank mortgage. A secured loan means the lender can sell the property to recover their funds if you default. The difference is transparency: private lenders are explicit about this from the outset, and the short-term nature of the loan means you have a defined exit timeline. Responsible borrowing protects your position.

What is the difference between a first mortgage and a second mortgage with a private lender?

A first mortgage is registered first on the title and has priority recovery rights. A second mortgage sits behind the first (usually a bank loan) with secondary priority. If the property is sold under default, the first mortgage is repaid before the second. Second mortgages carry higher rates than first mortgages but allow you to access equity without disturbing your existing bank facility.

Can I use property in another state as security?

Yes. Non-bank lenders operate nationally and accept property in any Australian state or territory. Each state has its own land titles system and registration process, but your broker and the lender's solicitor handle the interstate logistics.

What happens when the loan term ends?

You repay the loan through your agreed exit strategy: selling property, refinancing to a bank, or repaying from business revenue. The lender discharges the mortgage or withdraws the caveat from the title. If you cannot repay at maturity, you may negotiate an extension or refinance with another lender, but this should be a contingency, not the primary plan.

Do I lose access to the property during the loan?

No. You retain full use and occupation of the property throughout the term. The mortgage or caveat is a registered interest on title that restricts your ability to sell or further encumber the property without the lender's consent, but it does not affect your use or occupation.

Can I get a loan against a property I do not yet own?

Yes, in some structures. Construction loans, development site loans, and some bridging structures fund the acquisition and use the newly acquired property as security. The mortgage is registered at settlement of the purchase. See our construction loan guide.

Are non-bank property loans more expensive than bank loans?

Generally yes, with a structurally lower bank rate as the comparison point. But the right comparison is usually against the alternative non-bank can fund and the bank cannot. For borrowers within bank policy, the bank is cheaper. For borrowers outside, non-bank is the practical answer.

The Bottom Line on Non-Bank Loans Secured on Property

A non-bank loan secured on property is structurally the same as a bank mortgage in legal mechanism. The difference is the lender, the underwriting model, the speed, the flexibility, and the rate. For Australian borrowers facing bank decline, complex structures, speed-critical deadlines, or credit issues, non-bank property-secured lending is one of the most accessible and well-understood funding tools available.

The decision rule: match the security to the product, the term to the exit, and the lender to the scenario. Use a specialist broker to compare across the market. Treat the structure as a 6 to 24 month bridge to a future bank refinance or asset sale. The product delivers exactly what it is built for.

If you have a property position and a financing need, talk to Innovate Funding for an indicative offer within 24 hours. Visit our knowledge hub for more guides, or contact us to discuss your scenario.