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WHAT IS A SHORT-TERM FIRST MORTGAGE?

In the case of mortgages, or loans secured against property, ‘first’ refers to priority. That is, the first mortgage lender has the primary claim to be repaid if the property is sold or the loan defaults. Also referred to as the ‘first registered interest,’ the first mortgage holder has priority over any other claims against the property (except for some government and statutory claims, such as land tax).

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Historically, first mortgages have been provided by big banks for a long term (often 15 years up to 30 years). Though it’s becoming increasingly clear that longer-term loans do not always suit everyone’s circumstances –particularly for borrowers who may only need access to funds for a shorter period of time or borrowers with affected credit history.

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The good news is that there are a number of alternative and private lenders in Australia who provide short-term first mortgages, which typically have a duration of two to 36 months.

THE BENEFITS OF USING A FIRST MORTGAGE FOR SHORT-TERM FUNDS?

Short-term first mortgages from private lenders have many benefits, including the following:

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  • First mortgages in Australia usually are more competitive than other loans (such as caveats or second mortgages)

  • A short-term first mortgage can be organised and settled very quickly (often within 3 to 5 days)

  • You can borrow to a higher amount (otherwise known as ‘loan to value ratio’ or ‘LVR’) compared to other mortgage loans

  • Private lenders usually require minimal paperwork for first mortgages in Australia and are supportive of self-employed applicants or borrowers with ‘less-than-perfect’ credit history

  • Short-time first mortgages are available from an increasing number of lenders, and you can often apply online, which is quick and easy

WHY YOU MIGHT USE A FIRST MORTGAGE FOR SHORT-TERM FUNDS?

There are a range of scenarios where you might consider a first mortgage to meet short-term financial needs, including:

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  • Releasing equity in your home to fund renovations to prepare your property for sale

  • Paying off urgent, sizable and often unexpected bills

  • Completing a small residential subdivision or development to cover costs, including construction, before funds from sales are received

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Some borrowers in Australia may also consider a short-term first mortgage on residential property to raise funds needed for a business. Common uses for business funding include providing working capital (otherwise known as cash flow) for a short period to cover the purchase of stock, slow customer invoice payments, outstanding tax bills, and so forth.

HOW TO APPLY FOR A SHORT-TERM FIRST MORTGAGE LOAN?

Our short-term first mortgage loans are flexible, require minimal documentation and are usually approved within days. We also accept applications from borrowers with affected credit history.

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At The Private Mortgage Factory, you can submit an inquiry by phone. Upon receiving your inquiry or application, we email an indicative quote that details the interest rates, costs, loan structure and document requirements. If you agree with the proposal, we then issue a formal and more detailed letter of offer. You return the signed proposal with the required documents, and we ask our solicitors to issue security documents or order a valuation if needed. Once we receive the security documents, we settle by electronic transfer of funds.

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Image by Pavel

FIRST MORTGAGES

The upside of a first mortgage:

 

  • Cheaper than a caveat or second mortgage loan

  • ​Faster than a second mortgage

  • Higher LVR’s available than a caveat or second mortgage

  • Buy a residential or commercial property if you don’t meet a traditional lender’s requirements

  • Get cash out of real estate that you already own by refinancing for business purposes

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