What paperwork will I need to provide for a private lender mortgage?

Private lenders will generally take a more personal approach to the borrower’s needs and will only require minimum paperwork compared to a full loan application to a bank. However, full proof of identity will still be required, plus proof of ownership of the property being offered up as security for the loan.

How much will I be able to borrow with a private home loan lender?

Private home loan lenders in general are prepared to offer an 80% loan-to-value ratio (LVR), although some may be prepared to offer as much as 100% of the cost of a property as long as sufficient security is provided. There’s no real minimum or maximum loan which a private lender may agree to provide, as all applications are treated on an individual basis.

If I take out a second mortgage, who gets paid first if I can’t make the mortgage repayments?

If a default on a property loan occurs, the first lender to register a mortgage on that property is always the first to receive any proceeds from the sale of the property. The second lender will only get paid once the first lender has received payment in full. For this reason, second mortgages are riskier than primary or first mortgages.

Can I finance first with a private lender, then refinance when my situation changes or improves?

Yes – private home loans are often used as a short-term or ‘stop-gap’ measure to tide the borrower over until a more permanent or long-term conventional loan can be arranged. Those with a poor credit history can use private home loan lenders to start repairing their credit record by seeking approval for a loan and then establishing a track record of regular on-time payments. A conventional lender may be persuaded to approve a home loan based on proof of several months of timely loan repayments and give you access to a better overall deal.

Are private money lenders regulated and safe to use?

All credit providers in Australia must comply with responsible lending conduct as described in the National Consumer Credit Protection Act 2009 (known as the National Credit Code). The Australian Securities and Investments Commission (ASIC) is the national regulator for credit providers in Australia and anyone offering credit is required to hold a credit licence with ASIC (or authorisation from a credit licensee). Before engaging with a private lender or agreeing to a private lender mortgage, it is important to check the lender is a registered credit provider with ASIC . Strict penalties apply to anyone offering credit in Australia without a credit licence (or the authority of someone who does hold a credit licence).