How to Refinance a Private Loan or Caveat Loan in Australia
An approaching private loan maturity date can create pressure, particularly when a property sale, business transaction or planned refinance takes longer than expected.
Before replacing the loan, establish three things: the exact amount required to repay the existing lender, whether the property supports the replacement borrowing, and how the new facility will ultimately be repaid.
Refinancing a private loan means replacing an existing facility with new finance. For eligible business-purpose transactions, the replacement may be structured as a first mortgage or second mortgage, depending on the existing security position and the incoming lender’s requirements.
Assurity Capital considers refinancing existing private loans, second mortgages and caveat-related funding arrangements, subject to assessment of the property security, overall debt, funding purpose and repayment strategy.
This guide explains what to prepare, how to compare costs and what can affect a private loan refinance.
When Might You Need to Refinance a Private Loan?
Private loan refinancing may be worth exploring when an existing facility is approaching maturity and the original repayment plan will not be completed in time.
Common situations include:
A property sale has taken longer than anticipated.
A contracted sale has a later settlement date.
A longer-term lender requires additional documents or conditions.
A business needs more time to complete a defined transaction.
An existing second mortgage is approaching its repayment date.
A short-term facility needs replacing with a structure better suited to the revised circumstances.
The reason for the delay matters.
A refinance supported by a signed sale contract presents a different proposition from one relying on an uncertain future sale. Similarly, waiting for an approved lender to complete settlement differs from hoping to qualify for a loan later.
A replacement loan should have a documented purpose and a credible repayment pathway.
Can You Refinance a Caveat Loan?
Potentially. Assurity Capital considers refinancing existing caveat loans and private mortgages where suitable property security and a realistic exit strategy are available. Approval depends on the individual transaction.
Start by identifying the underlying debt and the interests recorded against the property.
The expression “caveat loan” does not explain every legal feature of an arrangement. A solicitor should review the existing agreement, title position and the steps required to complete the proposed refinance.
Questions to resolve include:
Who is owed money?
What is the current payout amount?
Are there other mortgages or registered interests?
What documents must the outgoing lender provide?
What security does the incoming lender require?
Can the necessary releases and registrations be coordinated at settlement?
Avoid assuming that a new lender’s willingness to assess the application means the existing security issues have been resolved.
First Mortgage Refinance or Second Mortgage Refinance?
The appropriate structure depends on which debts will be repaid and which facilities will remain.
Refinancing into a first mortgage
A replacement first mortgage may be considered where the incoming lender will obtain first-ranking mortgage security.
This could involve refinancing an existing private first mortgage or paying out multiple existing facilities through one replacement loan.
Assurity Capital considers private first mortgage loans secured by Australian property for eligible business and investment purposes.
When assessing this option, include every debt that must be discharged and every cost required to complete the transaction.
Refinancing into a second mortgage
A replacement second mortgage may be considered where an existing first mortgage remains in place and the incoming lender accepts a second-ranking position.
Assurity Capital’s second mortgage offering includes consideration of refinancing existing private loans and caveat-related facilities. Existing lender requirements, combined debt, acceptable security and the proposed exit all need assessment.
Compare the total cost of retaining the first mortgage and replacing the secondary debt with the cost of refinancing the entire debt position.
How Much Equity Do You Need to Refinance?
There is no single equity figure that guarantees a private loan refinance.
The assessment depends on the property value accepted by the lender, existing secured debts, proposed facility amount and acceptable loan-to-value ratio, or LVR.
For a replacement second mortgage, combined LVR is particularly useful:
Combined LVR = total first and second mortgage debt ÷ accepted property value × 100.
Hypothetical refinance example
Assume:
Accepted property value: $1,000,000.
Existing first mortgage remaining in place: $450,000.
Payout required for an expiring second mortgage: $150,000.
Replacement finance costs added to borrowing: $10,000.
The replacement second mortgage would need to provide $160,000, assuming it funds the full payout and those costs.
Total secured borrowing would become:
$450,000 + $160,000 = $610,000.
Combined LVR would be:
$610,000 ÷ $1,000,000 × 100 = 61%.
This calculation does not establish approval. It illustrates how refinancing costs can increase the debt secured against the property.
The figures are hypothetical and do not represent Assurity Capital pricing or lending limits.
What if the valuation is lower?
If the accepted property value were $900,000, the same $610,000 debt would produce a combined LVR of approximately 67.8%.
That difference may affect the proposed structure or available funding.
Use a realistic property value at the start and confirm how the incoming lender will assess it.
Why the Current Loan Balance May Differ From the Payout
The balance shown on a statement may not be the amount required to discharge the loan.
A payout may include interest accrued to settlement, fees and other amounts payable under the agreement.
Request a written payout statement and confirm:
The date through which it is valid.
Whether interest continues to accrue daily.
Any minimum interest requirement.
Discharge or exit fees.
Legal expenses.
Default-related amounts, if applicable.
The process for updating the payout if settlement moves.
A delayed settlement can change the required funding amount. Leave enough time to obtain an updated figure and resolve any discrepancies.
What Does Refinancing a Private Loan Cost?
Compare the complete transaction, including the costs of leaving the old facility and establishing the new one.
Potential costs to check include:
Outgoing lender payout and discharge expenses.
New establishment fees.
Valuation costs.
Lender and borrower legal costs.
Broker fees, where applicable.
Interest during the replacement term.
Minimum interest periods.
Early repayment charges.
Extension fees and default provisions.
Ask for a written explanation of which charges apply, when they are payable and whether they are deducted from the advance.
Compare three amounts before accepting an offer
1. Amount required to complete settlement
This includes the outgoing payout, other debts being cleared and transaction expenses.
2. Net funds available
If you also need working capital, confirm how much remains after every settlement deduction.
3. Expected repayment amount
Request a payout illustration for the date you realistically expect to repay the replacement facility.
A lower headline interest rate does not necessarily mean a lower overall cost, especially when establishment expenses or minimum interest periods apply.
What Documents Help a Private Loan Refinance?
A useful initial submission explains the existing position and the proposed solution.
Prepare, where relevant:
Borrower and property owner details.
Company or trust information.
Security property addresses.
Existing loan agreements.
Current mortgage statements.
Written payout figures.
Details of other secured debts or registered interests.
Relevant valuations.
Maturity dates and settlement deadlines.
Any default notices or formal correspondence.
Evidence supporting the proposed exit.
Assurity Capital’s refinancing page invites borrowers to provide details of the existing facility, security and repayment plan so the scenario can be assessed.
Explain why the original exit changed. That information helps assess whether the replacement term is realistic.
How Long Does a Private Loan Refinance Take?
Timing depends on the property, documentation, valuation, title position, outgoing lender and legal requirements.
A transaction involving one clearly documented facility may be simpler than one involving multiple creditors, disputed amounts or unresolved ownership issues.
Distinguish between:
An initial indication.
Indicative terms.
Formal approval.
Completion of legal documents.
Satisfaction of settlement conditions.
Actual settlement.
An indicative offer is useful, but it does not mean the existing lender has been repaid.
If the maturity date is close, provide the exact date and explain any consequences already communicated by the outgoing lender. Avoid planning around an assumed settlement timeframe.
What Makes a Strong Exit Strategy?
A strong exit strategy identifies a repayment source, expected timing and evidence supporting both.
Exit through a property sale
Useful supporting information may include a signed contract, settlement date, expected net proceeds and any conditions that remain outstanding.
If the property has not sold, allow for marketing time, negotiation and settlement. Asking price is not the same as available repayment proceeds.
Exit through a longer-term refinance
Identify the proposed lender, application stage and conditions still to be satisfied.
Ask whether the expected new loan will cover the replacement facility’s eventual payout, including interest and fees.
Exit through business cash flow
Use realistic receipts and expense forecasts. Money expected to arrive is not all available for debt repayment if it is also needed for tax, suppliers, wages or other commitments.
Check the effect of delays
Model a later repayment date and a lower-than-expected repayment amount.
If either creates a shortfall, identify how it would be addressed before entering the replacement loan.
Refinance or Extend the Existing Loan?
An extension and a refinance are different options. Compare written terms for each if both are available.
An extension may avoid some new transaction expenses, but it may involve revised pricing, fees or additional conditions.
A refinance introduces a new assessment and settlement process. It may offer a different structure, but the costs and requirements must be understood.
Compare:
Total costs over the required period.
Whether the proposed term fits the exit.
Security and guarantee requirements.
Early repayment conditions.
Certainty of completion.
What happens if repayment is delayed again.
Neither option should be assumed available until confirmed.
Can You Refinance After Missing the Maturity Date?
An overdue facility requires an individual assessment. Missing maturity can affect the payout, available timeframe and willingness of another lender to proceed.
Provide accurate information about the loan’s status, including any formal notices or enforcement steps. Obtain legal advice about existing deadlines and obligations.
A refinance application does not itself extend the existing loan or change the outgoing lender’s rights. Any extension or standstill arrangement needs to be confirmed with the relevant parties.
Frequently Asked Questions
Can Assurity Capital refinance another private lender?
Assurity Capital considers eligible private-lender refinancing secured by Australian property. Assessment includes the security, total debt, funding purpose and proposed exit.
Can I refinance a private loan without changing my first mortgage?
Potentially. A replacement second mortgage may allow the first mortgage to remain, subject to the existing lender’s requirements and the incoming lender’s assessment.
Can refinance costs be included in the new loan?
That depends on the proposed facility and available borrowing capacity. Including costs increases the amount borrowed and may affect LVR and repayment requirements.
Will refinancing reduce my interest rate?
It may or may not. Compare actual offers and total dollar costs rather than assuming a replacement loan will be cheaper.
Can a private loan refinance provide additional business funds?
Potentially, subject to assessment. Any additional advance increases the debt and needs a defined purpose and repayment plan.
What if the new facility cannot cover the full payout?
The shortfall must be resolved before settlement can complete on the proposed terms. Options require discussion with the relevant parties and may include a borrower contribution or a revised structure.
Can Assurity Capital consider refinancing outside Sydney?
Assurity Capital considers eligible private lending across Australia. Property location, security and the individual transaction affect availability.
Discuss Your Private Loan Refinance With Assurity Capital
If an existing private loan, second mortgage or caveat-related facility is approaching maturity, organise the key information early.
Start with the current payout, property details, existing debt, required settlement date and evidence of your repayment plan.
Explore refinancing private lenders and caveat loans, first mortgage finance and second mortgage finance with Assurity Capital.
Contact Assurity Capital to discuss your refinancing scenario and the information needed for assessment.
General information only. Finance is subject to assessment, approval and individual terms. Property offered as security may be at risk if obligations are not met. Obtain advice appropriate to your circumstances before proceeding.
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