Private Home Loans in Australia: A Borrower's Guide to Private Mortgage Finance

Banks turn down good borrowers every day. Not because the deal is bad, but because the file does not fit the credit policy on the day it is read. A private home loan, funded by a private lender against residential property, often fills that gap when timing, credit history, or income documentation rule out the major banks.

This guide explains how private home loans work in Australia in 2026, the structures private lenders typically write, realistic LVR and pricing ranges, and the scenarios where this kind of finance is the right tool. It is written for property owners, investors, business owners using residential property as security, and brokers placing files outside the bank channel.

What is a private home loan?

A private home loan is a mortgage funded by a private lender or private mortgage fund rather than a major bank. It is secured by registered first or second mortgage over residential property in Australia and is repaid through a defined exit, usually refinance to a bank, sale of the property, or a business cash event such as completed contracts or asset sales.

Most private home loans in the Australian market run for 1 to 36 months, sit at an LVR of 75 percent or lower against current market value, and settle in days rather than weeks. They are most often used for business-purpose lending against residential security, short-term bridging, equity release, refinance of an existing mortgage in default, or any scenario where the major banks cannot move at the required speed.

• A private home loan is a mortgage funded by a private lender, not a bank, secured against residential property in Australia.

• It is most commonly used for business-purpose lending, bridging finance, equity release, or refinance scenarios where bank credit policy does not fit.

• Indicative rates start from around 8.95 percent per annum on first mortgages and 12 to 18 percent per annum on second mortgages, depending on LVR, security, and exit.

• Approval depends on the property, the LVR, the loan purpose, and a credible exit strategy.

  
  

Private home loan vs bank home loan

The two products serve different purposes. A bank home loan is long-term, regulated consumer or investment credit assessed on income, servicing, and credit history. A private home loan is short-term to medium-term capital assessed primarily on the security property and the exit strategy.

Feature	Bank home loan	Private home loan
Typical lender	Major or second-tier bank	Private lender, non-bank lender, private mortgage fund
Term	25 to 30 years	1 to 12months
Indicative rate	5.5 to 7.5 percent per annum	8.95 to 18 percent per annum
LVR	Up to 80 to 95 percent	Up to 75 percent, often 65 to 70 percent
Assessment focus	Income, servicing, credit	Security, LVR, exit strategy
Time to settle	4 to 8 weeks	3 to 14 business days
Regulation	NCCP-regulated consumer credit	Predominantly business-purpose, Non-NCCP

Private home loans are not designed to replace bank lending over the long term. They are a bridge between the borrower's current position and the next funding milestone.

When borrowers use a private home loan

The common thread across most private home loan scenarios is timing or fit. The bank either cannot move fast enough, or the borrower does not match current policy. Recurring scenarios include:

• Business owners unlocking equity in the family home for working capital. A business-purpose loan secured against residential property, used to fund stock, payroll, or a contract gap, repaid when receivables clear or a bank refinance completes.

• Bridging between two property settlements. A borrower has bought a new home and the sale of the existing home is delayed. A short-term private home loan covers settlement of the new property until the sale proceeds clear.

• Refinance of a bank mortgage in arrears or default. A bank lender has issued default notices, but there is equity in the property. Private lending refinances the bank position before enforcement and gives the borrower 6 to 12 months to recover, sell, or refinance back to a mainstream lender.

• Equity release where bank servicing fails. Self-employed borrowers, recently retired owners, or borrowers with adverse credit may have substantial equity but cannot evidence income to a bank standard. An equity release through a private home loan converts that equity into usable capital.

• Investors funding a deposit on the next property. Releasing equity from an existing investment property to fund a deposit or settlement on a new acquisition before traditional finance is in place.

In each case the private home loan is solving a timing or fit problem, not replacing the long-term mortgage.

How private home loans are structured in Australia

There is no single template, but most Australian private lenders structure private home loans within a fairly consistent range. Loan sizes typically run from $100,000 to $10,000,000 or more. Terms are 1 to 36 months, with most settling between 3 and 12 months. LVR is usually capped at 75 percent of current market value, lower for regional or specialised security. Indicative interest rates start from around 8.95 percent per annum on first mortgages and 12 to 18 percent per annum on second mortgages. Establishment fees usually fall between 1 and 3 percent. Interest is most often prepaid or capitalised, which keeps monthly cash flow free during the term. Settlement typically runs 3 to 10 business days for first mortgages and 7 to 14 business days for second mortgages because of the priority deed process.

The exit strategy is the single most important factor a lender assesses. A private home loan without a clear, demonstrable exit is unlikely to be funded.

Sydney scenario: equity release for a business owner

A self-employed business owner in Sydney's inner west owned a home worth $2.4m with a $720,000 mortgage to a major bank. The business needed $400,000 of working capital to fund a 6-month contract gap. The bank declined the equity release because tax returns lagged the trading position.

The structure used: a $400,000 second mortgage behind the existing $720,000 first mortgage, total combined LVR of 46.6 percent, 12-month term at 13.95 percent per annum, 6 months of interest capitalised into the loan, 1.5 percent establishment fee, settled in 11 business days from application after the first mortgagee returned a priority and consent deed. The exit was refinance into a non-bank business-purpose facility once the contract receivables cleared.

The net cost over 6 months was approximately $36,500 including interest, establishment fees, and legal costs. The contract delivered over $900,000 of gross revenue. The private home loan made the contract possible, and the borrower refinanced to a longer-term facility 7 months later.

First mortgage vs second mortgage private home loans

Private home loans are written in first position or behind an existing bank mortgage. The position changes the price, the LVR, and the documentation.

First mortgage private home loan.

The private lender takes senior security. Used when there is no existing mortgage, or when the borrower is refinancing the bank entirely. Lower pricing, typically 8.95 to 11 percent per annum. Higher LVR available, up to 75 percent of current value. Cleaner documentation with no priority deed required.

Second mortgage private home loan.

Used when the existing bank mortgage stays in place and the borrower needs additional capital behind it. Common for equity release without disturbing the bank facility, or where the bank will not increase its limit. Higher pricing, typically 12 to 18 percent per annum. Combined LVR usually capped at 70 to 75 percent. Requires a priority and consent deed from the bank, which can add 5 to 10 business days to settlement.

Innovate Funding helps borrowers access both structures through its first mortgage and second mortgage panels of private lenders.

Who private home loans suit

Private home loans suit borrowers who have meaningful equity in residential property, a clear short-term to medium-term use of funds, and a credible exit strategy. They are commonly used by business owners, property investors, self-employed borrowers, borrowers refinancing a bank mortgage under pressure, and borrowers with adverse credit who can demonstrate a path back to a mainstream lender.

They do not suit borrowers looking for the cheapest long-term rate. They do not suit borrowers without an exit. They do not suit borrowers whose only repayment plan is to refinance to the same kind of lender at the end of the term, because each refinance compounds cost and risk.

Risks and how to manage them

Private home loans are fast capital. Fast capital deserves respect. Plan for exit slippage by building a 30 to 60 day buffer into the term. If the refinance or sale takes longer than expected, extension fees apply and rates can step up. Order valuations early through a panel valuer the lender accepts to manage valuation risk. Always check whether the loan is structured as business-purpose lending, in which case NCCP consumer protections may not apply, or as regulated consumer credit, where they do. Borrowers should seek independent legal, financial, and tax advice before signing. Default rates on private home loans typically run 4 to 6 percent above the standard rate, so communicate with the lender early if a milestone is slipping.

What lenders look for in a private home loan application

Private lenders are pragmatic but not passive. To approve a private home loan quickly, expect to provide: current title and mortgage details for the security property, a current valuation or recent contract of sale, a clearly written exit strategy with supporting evidence such as a refinance terms sheet or signed sale contract, borrower and guarantor ID and ASIC searches, a brief statement of position, evidence of loan purpose for business-purpose lending, and a plan for how interest will be serviced or prepaid.

A well-prepared application can settle in 3 to 5 business days on a first mortgage. An application missing the exit narrative will not settle at all.

Costs to expect

The headline interest rate is only part of the cost. A realistic all-in calculation should include interest for the expected term, lender establishment fee of 1 to 3 percent, lender's legal and borrower's legal fees, valuation fee, a mortgage discharge cost when the loan is repaid, and any consent deed cost on second mortgage transactions.

For a $500,000, 12-month first mortgage private home loan at 9.95 percent per annum with a 2 percent establishment fee, interest is approximately $49,750, the establishment fee is $10,000, and legals plus valuation add another $2,000 to $5,000. Total cost over 12 months sits in the $63,000 to $66,000 range. Against the cost of losing a contract, a settlement, or a property opportunity, the maths is usually straightforward.

How Innovate Funding helps

Innovate Funding works with a panel of private lenders, non-bank lenders, and private mortgage funds across Australia. The team helps borrowers structure private home loan applications, match the file to the right lender on day one, and run the loan from indicative terms through to settlement. Indicative positions are usually returned within 24 hours, and well-prepared files routinely settle inside a week on first mortgages. Innovate Funding does not act as the direct lender on every transaction. The role is to help borrowers access the right private lending solution for the security, the purpose, and the exit. For an overview of how private lending works in the Australian market, see the private lending in Australia pillar guide.

Key takeaways

• A private home loan is a short-term to medium-term mortgage funded by a private lender against residential property in Australia.

• Indicative pricing starts from around 8.95 percent per annum on first mortgages and 12 to 18 percent per annum on second mortgages.

• LVR is usually capped at 75 percent of current market value, lower on second mortgages or specialised security.

• The most important factor in approval is a clear, credible exit strategy, not income or credit history.

• Private home loans suit business owners, investors, and borrowers solving a timing or fit problem, not borrowers seeking the cheapest long-term rate.

• Most private home loans against residential property are written as business-purpose lending. Borrowers should seek independent legal, financial, and tax advice before signing.

  
  

FAQs

Can I get a private home loan with bad credit?

Yes, in many cases. Private lenders assess the security and the exit before the credit file. Adverse credit, defaults, and ATO arrears are not automatic disqualifiers where there is sufficient equity and a credible repayment plan.

How fast can a private home loan settle?

First mortgage private home loans regularly settle in 3 to 7 business days when the file is well prepared. Second mortgage private home loans usually take 7 to 14 business days because of the priority and consent deed process with the existing first mortgagee.

Is a private home loan the same as a private mortgage?

A private home loan is a type of private mortgage written against residential property. Private mortgages can also include commercial property security, second mortgages, caveat loans, and longer-term private lending.

Do I need to prove income for a private home loan?

Usually no, not at bank standard. Private lenders rely on the security, LVR, and exit. Some lenders will ask for a basic statement of position or trading evidence for business-purpose loans, but full PAYG or tax-return servicing is rarely required.

Are private home loans regulated by NCCP?

Most private home loans against residential property in Australia are written as business-purpose lending and sit outside the NCCP consumer protections. Where the loan is for personal, domestic, or household purposes, NCCP applies and the lender must be appropriately licensed. Always confirm with the lender and seek independent legal advice.

What happens at the end of the term?

The loan is repaid through the exit agreed at the start, usually refinance to a bank or non-bank lender, sale of the security property, or a business cash event such as completed contract proceeds. Extensions are sometimes available where the exit is delayed, subject to extension fees and lender assessment.

The bottom line

For Australian property owners, business owners, and investors, a private home loan is a precise tool, not a generic substitute for bank credit. Used well, it unlocks equity, preserves settlements, and gives borrowers time to land back at a mainstream lender. Used poorly without a credible exit it becomes expensive debt with a hard deadline.

If you are weighing an equity release, a bridging gap, or a refinance under pressure, the team at Innovate Funding can give you an indicative position within 24 hours and settle inside a week when the file is ready.

Speak to a private lending specialist about a private home loan today. Request indicative terms or review the private lending in Australia pillar guide for more context.