First Mortgage vs Second Mortgage – What’s the Difference in Private Lending?

Assurity Capital
Aug 2
2 min read

When exploring private lending options, many borrowers and brokers come across terms like first mortgage and second mortgage. But what do they actually mean—and which one suits your funding needs?

At Assurity Capital, we specialise in both first and second mortgage loans. Understanding the difference can help you unlock the right solution, especially when speed and flexibility matter.

What Is a First Mortgage?

A first mortgage is the primary loan secured against a property. It holds first priority on the title, meaning that in the event of a sale or default, the first mortgage lender is paid out before any others.

Key Features:

Often has lower interest rates than second mortgages
Can be used for larger amounts or higher LVRs
Suitable for borrowers who own property outright or are refinancing an existing loan

At Assurity Capital, our private first mortgages are typically short-term loans used for business or investment purposes—such as bridging, development, or urgent working capital.

What Is a Second Mortgage?

A second mortgage is a loan secured behind an existing first mortgage. It is considered subordinate because it ranks second in repayment priority if the property is sold.

When Second Mortgages Are Used:

The borrower has equity in a property but wants to leave the first mortgage in place
The purpose is short-term, such as funding for a business opportunity, bridging finance, or to repay tax debts or creditors
The borrower wants to avoid refinancing their existing mortgage, especially if it has favourable terms or low exit fees

While second mortgages carry more risk to the lender, they are a powerful tool for borrowers needing access to fast capital using existing equity.

Key Differences at a Glance

Feature	First Mortgage	Second Mortgage
Priority	First charge on the property title	Subordinate to existing mortgage
Risk (to lender)	Lower	Higher
Interest Rate	Lower	Slightly higher
Loan Amount	Based on total LVR	Based on available equity
Use Case	Purchase, refinance, development	Cash flow, bridging, creditor payments
Exit Strategy	Refinance or sale	Often refinanced into one facility

Example Scenarios

A business owner owns a commercial property with a $400,000 first mortgage. The property is worth $1 million. They need $200,000 urgently to pay suppliers. A second mortgage private loan can provide fast access without touching the existing loan.
A developer owns land outright and needs $700,000 to begin civil works. A first mortgage private loan can be arranged within days, secured solely against the land.