If you own a home or investment property with equity, you’re probably sitting on the quickest business funding you’ll ever find. A second mortgage lets you use that equity without touching your existing home loan. Here’s exactly how it works, step by step, and when it makes sense for a tradie or small builder.
Key takeaways
- A second mortgage is secured against property you already own and ranks behind your current home loan.
- Your existing home loan stays untouched. No refinance, no break costs on that loan.
- No financials or cash flow records are needed, and bad credit is considered.
- Funding can happen in as little as 24 hours in some cases, typically a few days once valuation and documents are in.
- Terms are typically 1 to 12 months, so you need a clear plan to repay.
What is a second mortgage?
When you bought your home, your lender registered a mortgage on the title. That’s the first mortgage, and it gets paid first if the property is ever sold. A second mortgage is another loan registered on the same title, ranking second. The second lender is protected by whatever equity is left after the first mortgage.
Security can be your home, an investment property, commercial property or land with equity. It can also be a property owned by a guarantor, such as a family member or business partner who’s willing to support the loan.
One important point: the loan is secured against existing property. We don’t lend against the value of a build you haven’t finished yet.
How much equity do I have?
Equity is the difference between what the property is worth and what you owe on it.
Example (hypothetical):
| Amount | |
|---|---|
| Property value | $1,200,000 |
| Home loan balance | $650,000 |
| Equity | $550,000 |
You can’t normally borrow every dollar of that equity, because lenders keep a buffer. How much of it can be used depends on the property type, its location and your plan to repay. A lending specialist will give you a realistic figure after a short chat.
How does a second mortgage work, step by step?
- Enquire online. Fill in the 60 second form with the amount, the property and what the money’s for. It won’t affect your credit score.
- Talk it through. A lending specialist calls you back to understand the purpose, the security and how you’ll repay.
- Indicative offer. If it stacks up, you’ll get an outline of the loan amount, term and costs, priced on your circumstances.
- Valuation. The lender arranges a valuation of the property. For some loans this can be fast tracked.
- Documents. You provide ID, the property details and your current home loan statement. No tax returns or financials needed.
- Loan documents signed. You sign the loan and mortgage documents, usually with independent advice where required.
- Settlement and funding. The mortgage is registered on title and the money is paid into your account. This can be as little as 24 hours from approval in some cases.
- Repay. You repay by the end of the term from your planned exit, such as progress claims, a property sale or a refinance.
Does my first lender need to know?
Often the second lender will notify the first mortgage holder, and some home loan contracts require the first lender’s consent for another mortgage on the title. Our lending team will check this as part of the process, and it rarely stops a deal going ahead. It’s one of the reasons it helps to have your current home loan statement handy.
What do tradies and builders use second mortgages for?
- Paying an ATO debt or overdue BAS before it turns into a bigger problem
- Buying materials in bulk for signed jobs
- Covering wages while waiting on progress claims or retention
- Settling on a block of land for a small build
- Finishing a build that’s run over budget
- Buying used plant or a ute at auction
- Rolling several expensive debts into one
It’s for business purposes, not personal spending. See our fast second mortgage page for more on how we fund builders and tradies.
Example: A roofer in Adelaide gets a letter from the ATO about a tax debt that’s grown to $140,000. His company has had a rough year on paper, so the bank won’t touch it. He owns his home with plenty of equity. A 9 month second mortgage clears the ATO debt, and he repays it as his next two big commercial jobs are paid.
Second mortgage vs caveat loan vs first mortgage
| Second mortgage | Caveat loan | First mortgage | |
|---|---|---|---|
| Where | All states and territories | Victoria only | All states and territories |
| Security | Registered mortgage behind your home loan | Caveat lodged on title | Registered mortgage, ranks first |
| Existing home loan | Stays in place | Stays in place | Paid out or property owned outright |
| Best for | Most secured borrowing | Very fast Victorian deals | Properties with no loan, or refinancing the first loan |
Second mortgages are by far the most common secured product. In Victoria, some builders use a caveat loan for speed. If the property has no loan on it, or you want to replace your current loan, a fast first mortgage may suit better. For a detailed comparison, read second mortgage vs caveat loan.
What does a second mortgage cost?
Every loan is priced on your circumstances: the property, the loan size, the term and your exit plan. We find the sharpest rate available for your situation and set out every cost clearly before you sign. The real comparison is against the cost of not acting, such as ATO penalties, a lost job or a stalled build.
What should my exit plan look like?
Because terms are typically 1 to 12 months, the lender wants to see how the loan will be repaid. Common exits for tradies and builders are:
- progress claims or final payments on signed jobs
- the sale of a property or completed unit
- refinancing to a longer term loan once your books are up to date
- a known payment such as a retention release or insurance payout
Be honest and realistic about timing. Building in a few weeks of buffer is always smart.
Key facts
- Loan size: $20,000 to $5 million
- Security: existing property you or a guarantor own
- Speed: as little as 24 hours in some cases; typically a few days once valuation and documents are in
- Term: typically 1 to 12 months
- Paperwork: no financials or cash flow records needed
- Credit: bad credit considered
Ready to see what your equity can do?
It takes about 60 seconds to see if you qualify. There’s no cost to enquire, it won’t affect your credit score, and a lending specialist will call you back to walk you through the numbers. We’ll tell you quickly if we can help.
