First mortgage business loans, explained

“First” is the important word here. When a lender holds the first mortgage over a property, it’s first in line if the property ever has to be sold to repay debts. That position is the strongest security a property lender can have — and it’s why first mortgage business loans can stretch to the largest amounts.

What is a first mortgage business loan?

It’s a business-purpose loan secured by a mortgage that ranks first on the property’s title. The property might be your home, an investment property, or the commercial premises your business operates from. The money, though, is for the business: growth, an acquisition, paying out expensive debts, funding a big project, or clearing a tax bill.

There are two common situations:

1. The property has no mortgage. The new business loan simply becomes the first mortgage.
2. The property already has a mortgage. The new loan pays out the existing lender and becomes the new first mortgage, often releasing extra equity in the same transaction.

If you want to keep your current home loan untouched, that’s what a second mortgage business loan is for.

Who is a first mortgage business loan good for?

• Owners with debt-free or lightly geared property who want to put that equity to work for the business.
• Businesses consolidating several debts — car loans, equipment loans, a tax debt, an expensive short-term loan — into one facility. See business debt consolidation.
• Bigger projects: buying a competitor, a second site, a major fit-out or a large equipment upgrade.
• Owners whose existing lender won’t increase their loan for a business purpose, but who have the equity to support it elsewhere.

How does it work, step by step?

1. Tell us the plan. Purpose, amount, the property’s address and any existing mortgage balance. No credit check to enquire.
2. Rough equity check. Estimated value minus existing debt gives the available equity, expressed as an LVR.
3. Structure discussion. We look at term, repayment style (for example interest-only versus principal and interest) and how the loan will ultimately be repaid.
4. Indicative offer and valuation. A formal valuation confirms the security.
5. Payout figure. If there’s an existing mortgage, a payout figure is requested from that lender.
6. Documents and settlement. Loan and mortgage documents are signed, the old mortgage is discharged and the new one registered. Surplus funds go to the business purpose.

Our guide to repayment structures explains the difference between interest-only, principal and interest, and balloon arrangements if you’d like to compare.

What are the pros and cons?

Pros	Cons
Strongest security position, so the largest amounts are possible	Replaces any existing first mortgage
Can refinance and release equity in a single step	More legal work than a second mortgage
Suits consolidating several debts into one	Discharge and settlement costs from the old lender
Longer terms are possible	Property is at risk if the loan isn’t repaid
Credit history weighs less with strong equity	Every property owner must sign

A first mortgage is a big decision, and it’s worth asking someone who’ll tell you whether a smaller second mortgage or an unsecured option would do the job instead. If you want that sanity check, send us the details.

What does a first mortgage refinance look like? (illustrative)

Imagine a landscaping business owner whose home is worth around $1.3m with $350k left on the home loan. Over the years the business has collected an equipment loan, a short-term loan taken in a hurry and an ATO payment plan — three repayments, three due dates and one tired owner.

A first mortgage business loan could pay out the home loan and the three business debts at settlement, leaving one facility with one repayment. Spare equity might also fund the new tipper truck that’s been on the wish list. The family still lives in the house; the difference is that the lender holding the first mortgage is now a business lender, and the debts are organised around the business’s cash flow rather than scattered across the calendar.

The catch: consolidating spreads short-term debts over a longer term, which can mean paying more in total. That trade-off is worth discussing openly before you commit — the aim is breathing room, not a bigger pile. The figures here are illustrative only.

What documents are needed?

• Photo ID for borrowers, guarantors and property owners
• ABN or ACN
• Rates notice or title details for the property
• Current mortgage statement (if there’s an existing loan) so a payout figure can be ordered
• Business bank statements and, for larger amounts, BAS or financial statements
• Details of any debts being paid out as part of the loan

What are the alternatives?

• Second mortgage business loan — keep your existing home loan and borrow against spare equity.
• Caveat loan — fast, short-term and lightly documented over Victorian property.
• Property-backed business loan — the broad view of using home or investment equity for a non-property business.
• Unsecured business loan — no property at all, for smaller amounts.

Ready to put that equity to work?

A property with plenty of equity is one of the most powerful tools a business owner has. Used carefully, a first mortgage business loan can replace a tangle of debts with one clear repayment, or fund the growth step that’s been on the whiteboard for years.

Find out what’s realistic without any risk to your credit score — there’s no credit check when you enquire. We don’t scatter your details across the market, and a real specialist reads your form and calls you. Please fill in the property value, existing mortgage and purpose as accurately as you can so we can model it properly. See if you qualify.