The problem with refinancing a good first mortgage
You've written a solid first mortgage for a client. The structure suits them, the pricing is sharp and the lender relationship is good. Then the business needs money fast. A supplier needs paying, the ATO wants a lump sum, or there's an opportunity that won't wait. The obvious answer is to refinance and pull out equity, but that means unwinding a loan that's working, waiting on a full bank process that commonly takes up to three months or more, and risking a lower approval than the client needs.
A second mortgage avoids all of that. Equity Tap lends from $50k to $5m for one to twelve months, registered behind the existing first mortgage. The first mortgage stays exactly where it is. The first lender's consent may be needed, and we'll tell you early if it is.
How a second mortgage works for your client
A second mortgage is a registered security over the same property, ranking behind the existing first mortgage. If the property is sold or refinanced, the first lender is repaid first, then us. Because we sit behind, we look carefully at the total debt against the property and at the exit. We don't order a valuation before approval, so the process doesn't stop while a valuer is booked.
The client keeps making their normal first mortgage repayments. On our loan, repayments are interest only, or interest for up to the first six months can be prepaid or added to the loan so there are no scheduled payments during that period. Interest is not waived. See how prepaid interest works for an illustration you can share with the client.
For a business-owner friendly explanation of the product itself, send your client to what is a second mortgage.
Second mortgage vs refinancing the first
| Refinance the first mortgage | Equity Tap second mortgage | |
|---|---|---|
| Existing first mortgage | Repaid and replaced | Stays in place |
| Time to funds | Commonly up to three months or more | Eligible loans can settle in as little as 24 hours |
| Valuation | Usually required | Not ordered before approval |
| Financials | Tax returns, BAS, statements | Not needed for a property-secured loan |
| Term | Long-term, often 20 to 30 years | One to twelve months, matched to the exit |
| Credit history | Checked early | No credit check at initial assessment |
When a second mortgage is the right call
- The need is short. The client needs funds for weeks or months, not decades.
- The first mortgage is worth keeping. Good pricing, the right structure, or a facility that would be hard to replace.
- Time is short. A deadline is coming that a refinance can't meet.
- The bank won't increase. The existing lender won't top up due to serviceability, credit policy or recent trading.
- There's a clear exit. A sale, a refinance once figures improve, receivables, a contract payment or cash flow.
If the existing lender would need to be repaid anyway, or there's no first mortgage at all, a first mortgage business loan may suit better. If the need is very short and speed is everything, a caveat could be the faster option; see caveat and bridging for broker clients.
For example
For example, a broker's client runs a joinery business and owns a home with a first mortgage the broker arranged two years ago. A large commercial fit-out contract requires materials up front, and the client's bank won't extend because the last set of financials was lodged before the business grew. A second mortgage for four months covers the materials. Interest is added to the loan for that period, so there are no repayments while the job is underway, and the loan is repaid from the progress payments. The first mortgage is never touched.
The first lender's consent
Some first mortgages require the lender's consent before a second mortgage is registered. We work with you on this. It's often the step that determines timing, so it's worth checking the first mortgage terms early. If consent is going to be slow, we'll talk through whether a different structure suits the timeline.
What we need from you
- Loan amount, term and the business purpose
- Security property details and a realistic estimate of value
- A current statement for the first mortgage
- Borrower and guarantor details and ID
- Evidence of the exit
No tax returns, BAS, profit and loss, accountant's letter or bank statements. Once we have the scenario, we can often give conditional approval on the phone and issue a term sheet in about 30 minutes.
Keep the client and keep the loan
Equity Tap is regarded as one of the fastest second mortgage business lenders in Australia. We're a short-term lender and you stay the client's broker. Each loan is priced on the client's individual circumstances, aiming for the sharpest rate available for that situation, with the full cost shown before proceeding. Call 1300 123 024 or start at apply. More on our broker approach at fast private lender for brokers.
Business-purpose lending only. Approval, timing and terms depend on the scenario.
Frequently asked questions
Will the second mortgage affect the first mortgage I arranged?
Do you need a valuation for a second mortgage?
How long can a second mortgage run for?
Can the client avoid repayments on the second mortgage?
What if the first lender won't consent?
Does the property have to be residential?
How is the second mortgage repaid?
Brokers: send the scenario through the Equity Tap broker channel and you will deal with the same lending team.