Second Mortgage In Australia

What Is A Second Mortgage?

A second mortgage is a loan secured against a property that already has a mortgage registered against it. The new loan has priority over the first mortgage.

This means that if the property is sold, the first lender is repaid before the second lender receives any money. Because the second lender has less protection, second mortgages are considered higher risk and are usually harder to get approved.

For that reason, most borrowers in Australia choose to refinance their loan or release equity rather than take out a second mortgage.

How Much Can You Borrow With A Second Mortgage In Australia?

• Most lenders cap borrowing at a 60–80% Loan to Value Ratio (LVR). This means your total loans (first and second mortgage combined) usually can’t exceed 60–80% of your property’s value.
• Up to 95% LVR with the same lender (in some cases). If your second mortgage is with your current bank, they may allow a higher total LVR because they control both loans.
• Up to 85% LVR with a different lender. When a second lender is involved, borrowing limits are typically lower due to the increased risk.
• Low doc options are very limited. Most mainstream lenders don’t offer low-doc second mortgages; they are generally available only through private lenders.
• Discounted rates are uncommon. Second mortgages usually carry higher interest rates, and lenders rarely offer the same discounts as on standard home loans.

How Does A Second Mortgage Work When You Already Have A Home Loan?

A second mortgage lets you borrow extra money against your property without replacing your current home loan. Here’s how it usually works:

• You apply for a second mortgage, and the lender assesses your income, equity, and combined Loan-to-Value Ratio (LVR).
• The second lender gives conditional approval based on their higher-risk position behind your existing loan.
• Your current lender is asked to consent, and they may charge a consent or legal processing fee to review the request.
• You keep your existing home loan unchanged, with your lender remaining in first position.
• The second lender registers their mortgage on the property behind the first lender.
• Both loans are secured against the same property, but the first lender has priority if the property is sold.

Talk To An Expert

A second mortgage can be the right option in some situations, but refinancing or releasing equity is often simpler and more cost-effective. One of our mortgage brokers can help you compare your options and find the most suitable solution based on your goals and current loan setup.

Call on 1300 889 743 or complete our free assessment form to speak with a mortgage broker.