Private mortgages in Australia are fast becoming a mainstream form of lending. They are funded by sophisticated investors (private individuals) or a private company.
At DFS, we help our business clients to get private mortgages from our panel of private lenders. We have:
- A simple application process.
- No credit checks.
- Fast approvals and settlement.
Become a private lender investor here.
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What private mortgages can be used for in Australia
- Buying property
For example, buying land for property development projects.
- Bridging loans
Bridging loans can help you buy one property while selling another.
- Urgent capital for business purposes.
For example, buying equipment, vehicles or a business.
- Consolidating high-interest debt
A mortgage is low-interest finance. You can save interest and lower your repayments by consolidating all your high-interest debt into a single loan.
- Construction projects
For example, multi-residential unit or townhouse complexes.
Why private mortgages can be easier to get than traditional mortgages
Traditional lenders like banks, building societies and credit unions tend to have stricter lending criteria than private lenders. They are regulated by the National Credit Code. It can be difficult to get a loan with a traditional lender in the following situations.
- You are self-employed
If you’re self-employed, you may not be able to satisfy a traditional lender’s proof of stable income requirements. A private lender on the other hand will be more likely to approve a mortgage with more flexible repayment terms. These terms can better suit your business cash flow.
- You have a bad credit score
If you have a bad credit score, a traditional lender will be more likely to decline your mortgage application than a private lender.
Traditional lenders will conduct credit checks of your application. They can access your credit score through credit reporting agencies like Equifax. Your credit score can be negatively affected by any late or missed credit repayments for up to seven years. That includes loans, credit cards and ATO debts, as well as services like mobile phone, electricity and gas accounts.
How private mortgages work
Private mortgages work like traditional home loans but they are for business borrowers and they usually have shorter terms. They are generally easier to get and they also usually have more flexible terms and conditions.
The property being bought is used as collateral security for the loan. Australian property prices have a long-term record of stability and growth, so private mortgages are a secure form of finance for both the lender and the borrower.
Private mortgage FAQs
Are private mortgages legal?
Yes, provided the loan is for business purposes.
Even though private mortgages are not regulated by the National Credit Code, they are still loan contracts. Both borrowers and lenders are therefore protected by the provisions of Australian contract law.
Can you get unsecured private mortgages?
No, the property must be used as security for a private mortgage.
The benefit of this is that the property security lowers the lender’s risk. It therefore enables the private lender to offer you better loan terms and conditions. The property security also removes the need for a lender to conduct a credit check if you have a bad credit history. They can then approve your loan faster.
Unsecured loans from traditional lenders on the other hand are high risk and higher interest rates are charged accordingly. You can avoid that extra cost with a private mortgage.
What are the terms and conditions of private mortgages?
These depends on your specific financial situation, needs and goals.
At DFS, we take the time to understand our clients’ individual circumstances before matching them with a suitable private lender.
What is a loan-to-value ratio (LVR)?
An LVR is the amount you borrow expressed as a percentage of the value of the property you want to buy. For example, if you want to borrow $900,000 and the value of the property is $1 million, your LVR is 90%.
The more deposit you have, the lower your LVR will be (and vice versa).