Fast second mortgages in Australia: why they settle before a first mortgage
A second mortgage is usually the faster way to borrow against a property that already has a loan on it, because it registers behind the existing first mortgage instead of waiting for that mortgage to be paid out and discharged. HomeSec lends from $20,000 to $5,000,000 against property security, and a second mortgage can be funded within 24 hours and typically settles in 24 – 72 hours. It is not the fastest instrument in every case, and this page says where it is not.
1:50 The question put to Paul Stone in the video above is a fair one. Why would a broker use a private second mortgage when a private first mortgage costs less? He answers with a question of his own: how soon does the client need the money? Everything else on this page is that question worked through.
Where the time actually goes
Over a property that already carries a loan, a private first mortgage means the new lender has to pay out the existing one, and the existing lender has to discharge it. That step is not in the new lender's hands, and it is not in yours. Paul's experience is that some banks take up to 21 days over it, which leaves the whole timetable in the existing lender's hands.
A second mortgage does not wait on that. It registers behind the existing loan, and the existing loan stays exactly where it is: same rate, same term, same structure.
| Over a property that already has a mortgage | What it waits on | Your existing loan | Typical settlement |
|---|---|---|---|
| Private first mortgage | The existing lender discharging | Paid out and replaced | Set by the existing lender's discharge |
| Second mortgage | The first mortgagee's consent, where the mortgage calls for it | Untouched | 24 – 72 hours |
| Caveat | Nothing from the existing lender | Untouched | As little as 24 hours |
HomeSec's own three instruments over the same property. Settlement is from a complete scenario and subject to assessment and approval.
In Paul's words
Five lines from the video, as spoken:
“If they need the money like yesterday, well, a private first mortgage is just not going to cut it.”
“Some banks, for example, will take up to 21 days” to discharge the first mortgage, so “you can be at the mercy of the outgoing first mortgage.”
“With a second mortgage, we just slot in behind that existing first.”
“Does the client need the money in a hurry? If they do, a second mortgage is the answer.”
Paul Stone, from the HomeSec video above. Quoted from the video's own captions.
Why the bank's position does not move
A bank asked to let a second lender register behind it is not being asked to give anything up. Where two mortgages are registered over the same land, the order of registration sets the ranking, and under section 56A of the Real Property Act 1900 (NSW) that ranking changes in one way only: by a registered memorandum of postponement. The second lender does not jump the queue. Section 56A is the New South Wales provision; the other states have their own Acts, and whether your own lender must consent is a question for your own mortgage document.
The sequence brokers use
Paul's description of the pattern is that many brokers fund a fast second mortgage first, then arrange a full bank or longer-term first-mortgage refinance afterwards. It splits one problem into two: the second mortgage deals with the date, and the refinance deals with the long-term structure at whatever pace the bank sets. If you are a broker, here is how we work with you; if the long-term answer is a first mortgage, that is covered here.
When a second mortgage is not the fast one
Speed is the argument for it, so it is worth being plain about the cases where it is not the quickest road.
- Your first mortgagee is slow to consent. That step is the difference between the two ends of 24 – 72 hours. A caveat needs nobody's consent and is the faster of the two where the date is tight.
- Nothing is owing on the property. With no existing loan there is nothing to discharge, and a first mortgage is just as fast and the lowest cost of the three.
- The problem is not timing. A second mortgage solves a timing problem. If the business is losing money structurally, borrowing against the property makes the outcome worse, and we would rather say so in the first ten minutes.
What we look at
Equity in the property, what the money is for, and how it is repaid. The combined LVR goes to 80% on residential security and 70% on commercial. The mechanics, the worked positions and the cost of each instrument are on the second mortgage page; how the pricing is set, and why none is published, is on what it costs.
This page is general information about land titles procedure and is not legal advice. Take your own mortgage document to your conveyancer or solicitor before relying on it.
Most people reading this have a mortgage they cannot or do not want to pay out, and a date that will not wait for the bank.
If you are reading this because money is tight, it may be that what you actually need is fast business finance — and HomeSec can lend with very few qualification criteria. All you need is sufficient equity in real estate and a business purpose: no financials, no valuation, no credit score threshold, funded in as little as 24 hours from a clean, complete scenario. Best of all, the first six months can come with no requirement to make any payment.
That's the HomeSec Advantage.
Questions people ask alongside this one
How fast can a second mortgage be funded?
Is a second mortgage faster than a first mortgage?
Does a second mortgage need my bank's permission?
If a first mortgage is cheaper, why would anyone take a second?
Can I refinance out of a second mortgage afterwards?
What do you assess on a fast second mortgage?
See if you qualify in sixty seconds
Three short questions, no credit check to apply and no financial statements. A Lending Manager reads it and calls you back with a real answer — not a call centre, not an algorithm.
That's the HomeSec Advantage.
Reviewed by Paul Stone, Joint Chief Executive