Private Loan Interest Rates in Australia: What Do Private Mortgage Loans Cost?
Private loan interest rates in Australia vary widely. The rate and total cost of a private mortgage loan depend on the property security, loan-to-value ratio (LVR), whether the loan is a first or second mortgage, the loan term, purpose of funds and exit strategy.
Private property-backed finance is commonly used for short-term business and investment requirements. It can provide flexibility when a bank is too slow, unavailable or unsuitable, but it may cost more than mainstream bank finance.
The interest rate is only one part of the decision. Borrowers should understand all fees, legal costs, valuation costs, capitalised interest and the total amount payable at the end of the loan term.
At Assurity Capital, private first mortgages and second mortgages are considered for genuine business and investment purposes only. Finance is not available for consumer or owner-occupied personal lending.
What is a private loan interest rate?
A private loan interest rate is the amount charged by a private lender for providing finance.
Private mortgage interest may be quoted:
As an annual percentage rate.
As a monthly rate.
As interest paid monthly.
As interest capitalised into the loan.
As part of a total cost that also includes establishment, legal and other fees.
Private lending is usually short-term and property-backed. The lender takes risk based on the security property, total debt, loan structure and proposed exit. That risk affects the interest rate and overall pricing.
Why are private loan interest rates higher than bank rates?
Private lending may involve higher rates and fees because it commonly serves more complex, urgent or short-term scenarios than mainstream bank finance.
A bank may offer lower-cost lending where a borrower meets its serviceability, financial-documentation, property and policy requirements. A private lender may be considering a transaction where:
The funding requirement is urgent.
The loan is short-term.
The borrower has bad credit or a recent credit issue.
Financials are limited or complex.
The property is unusual, vacant, specialised or under development.
An existing loan is expiring.
A second mortgage is required.
The loan needs to be assessed around a specific property sale or refinance exit.
Higher pricing does not make a private loan unsuitable. It means the borrower must be clear about why the facility is needed, how long it will be used and how it will be repaid.
What affects private mortgage interest rates?
Private lenders generally assess each transaction individually. Important pricing factors include:
First mortgage or second mortgage
A first mortgage lender has first priority over the property. A second mortgage lender ranks behind the first mortgage and takes greater risk.
Because of this ranking risk, second mortgage interest rates and fees may be higher than a comparable first mortgage.
LVR or combined LVR
LVR compares total debt with the lender’s accepted property value.
For a second mortgage, the lender uses combined LVR, which includes the existing first mortgage plus the proposed second mortgage. Lower leverage can provide a larger equity buffer and may strengthen the scenario.
Property type and location
Residential, commercial, industrial, retail, development, rural and specialised properties carry different risk profiles. The lender considers value, location, marketability, condition, tenancy and saleability.
Loan amount and term
Loan size and how long the funds are required can affect pricing. A short, clearly defined loan with a strong exit may be assessed differently from a longer or more uncertain transaction.
Loan purpose
The lender will assess how the funds will be used. Working capital, commercial property finance, debt consolidation, ATO debt, development costs, urgent settlement funding and refinance scenarios can carry different risks.
Exit strategy
A clear and evidence-based exit strategy is central to private lending. A loan that will be repaid by a contracted sale, realistic bank refinance or verified capital event may be assessed differently from a loan relying on uncertain future events.
First mortgage vs second mortgage interest rates
Factor | Private first mortgage | Private second mortgage |
Security ranking | First priority | Ranks behind the first mortgage |
Lender risk | Lower than second-ranking security | Higher because the first lender is paid first |
LVR assessment | Total first-mortgage debt against property value | Combined LVR including first and second mortgages |
Typical pricing | Depends on security, LVR, purpose and exit | May be higher because of ranking risk |
Typical use | Purchase, refinance, business funding or debt consolidation | Accessing equity without refinancing the existing first mortgage |
A second mortgage can be useful where preserving an existing first mortgage is important. However, it is vital to understand the total cost of both facilities and the combined debt secured against the property.
What is capitalised interest?
Capitalised interest is interest added to the loan balance instead of being paid monthly.
For example, if a borrower has a six-month private loan with capitalised interest, the interest may be deducted from the loan proceeds at settlement or added to the payout required at maturity, depending on the agreed structure.
Capitalised interest can assist a borrower’s short-term cash flow, but it increases the total debt that must be repaid. It can also increase the LVR or combined LVR.
Borrowers should ask:
Is interest paid monthly, prepaid or capitalised?
How much interest will accrue over the full term?
Is the interest amount included in the initial loan balance?
What is the total payout figure at maturity?
What happens if the exit is delayed?
What fees apply to private mortgage loans?
The total cost of private finance may include more than interest.
Depending on the transaction, potential costs may include:
Establishment or application fees.
Lender legal costs.
Borrower legal costs.
Valuation costs.
Broker or introducer fees, where applicable.
Settlement or drawdown fees.
Discharge fees.
Default interest or enforcement costs if the borrower does not meet obligations.
Extension fees if a loan term is extended, where available.
Interest that is paid monthly, prepaid or capitalised.
The exact fees and costs should be disclosed in the relevant loan documents. Borrowers should obtain a clear breakdown before accepting finance.
How do I compare private loan costs?
Do not compare private loans only by the advertised interest rate.
A useful comparison should consider:
The amount that will actually be available to the borrower after fees and prepaid interest.
The total interest payable over the full loan term.
All establishment, legal, valuation and discharge costs.
Whether interest is monthly or capitalised.
The total payout figure at maturity.
The cost of extending the loan, if the original exit is delayed.
Whether the loan is first or second mortgage security.
The consequences of default.
A lower rate can still produce a less suitable outcome if fees, prepaid interest or terms significantly increase the total cost.
Can I get a lower private loan rate with more property equity?
Potentially.
A lower LVR or combined LVR may strengthen a private lending scenario because it provides a larger equity buffer. However, pricing depends on the complete transaction, including property type, loan purpose, first or second mortgage ranking, term, borrower circumstances and exit strategy.
More equity does not automatically guarantee a lower rate or approval.
Can private loan rates be fixed?
Private loan terms vary. The loan documents will set out how interest is calculated and whether the rate is fixed for the agreed term.
Borrowers should not assume that a private loan works like a standard long-term residential mortgage. They should review:
The interest rate.
How and when interest is payable.
The loan term.
Any default interest.
Minimum interest periods, if applicable.
Fees and charges.
The maturity date.
The repayment or exit requirements.
Independent legal, financial and tax advice should be obtained where appropriate.
Is a private loan worth the cost?
A private loan may be worth considering where it solves a defined business or investment problem that cannot be addressed in time through mainstream finance.
Examples may include:
Preventing an urgent settlement from failing.
Refinancing an expiring private loan while a bank refinance progresses.
Funding business working capital before a verified capital event.
Completing a development, renovation or commercial transaction.
Accessing equity without disturbing a favourable first mortgage.
A private loan may be unsuitable where the borrower does not have a clear exit, the funding need is ongoing, or the total cost will worsen an already unworkable debt position.
The right question is not simply, “What is the interest rate?” It is: “Does the total cost, term and repayment strategy make sense for this specific transaction?”
Private loan rates and costs with Assurity Capital
Assurity Capital assists business owners, investors and property professionals across Sydney, NSW and Australia with private property-backed finance.
We consider private first mortgages, second mortgages, bridging finance, debt consolidation, commercial property finance and short-term business funding where there is suitable property security, an eligible business or investment purpose and a realistic exit strategy.
Private-loan pricing is assessed individually. The applicable rate, fees, term and costs depend on the security property, existing debt, LVR or combined LVR, loan purpose and exit strategy.
Finance is subject to assessment, suitable security, eligibility, lender criteria, fees, approval and a realistic exit strategy.
What interest rate do private lenders charge in Australia?
Private loan interest rates vary by lender and transaction. Key factors include property security, LVR, first or second mortgage ranking, loan purpose, term and exit strategy.
Are second mortgage rates higher than first mortgage rates?
They can be. A second mortgage lender ranks behind the first lender and takes greater risk, which may result in higher interest rates and fees.
What is capitalised interest on a private loan?
Capitalised interest is interest added to the loan balance or deducted from proceeds rather than paid monthly. It increases the total amount payable at the end of the loan.
What fees should I check before taking a private loan?
Check interest, establishment fees, legal costs, valuation costs, prepaid or capitalised interest, discharge fees, extension fees and any default charges.
Are private loans more expensive than bank loans?
They can be. Private lending is commonly short-term and used for complex or time-sensitive scenarios, so the total cost may be higher than a bank loan for a borrower who qualifies for mainstream finance.
Does Assurity Capital offer private consumer loans?
No. Assurity Capital considers private property-backed finance for eligible business and investment purposes only.
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