Private mortgages and non-bank lending
When a deal needs to move faster than a bank can, or the scenario is too unusual for one, borrowers sometimes turn to private lenders. Speed and flexibility are the drawcards. The costs and short terms are the catch.
Last updated May 2026 · about 7 minute read · written by the Seek Mortgages editorial team
A private mortgage is a loan secured against property where the money comes from a private lender or an investor rather than a mainstream bank. It exists to solve problems that do not fit a standard credit assessment: a settlement that cannot wait, a bridging gap between buying and selling, or a short-term need where a conventional loan simply cannot be arranged in time. Used well, it is a tool. Used carelessly, it is an expensive one.
When private funding tends to be used
- Bridging. You have bought before selling and need to cover the gap for a few months.
- Time pressure. A settlement or opportunity has a hard deadline a bank cannot meet.
- Complex or short-term scenarios. A project or transaction that does not fit standard serviceability rules but has clear security and a clear exit.
- A defined exit plan. Almost every sensible private loan has a specific way out, usually a property sale or a refinance to a mainstream loan.
The exit is the whole game. Private mortgages are short-term by design. Before anyone takes one, the important question is not just can I get the money, it is how and when do I pay it back. Without a realistic exit, a short-term loan becomes a long-term problem.
Bridging loans and caveat loans
Two terms come up constantly in this space.
- Bridging loan. Short-term finance that covers the overlap between buying a new property and selling an existing one. It is repaid from the sale proceeds.
- Caveat loan. A fast, short-term loan secured by lodging a caveat over a property. It is quick to arrange because it sits behind existing security, but it is correspondingly short and costly.
What they cost, and why
Private lending prices in speed, flexibility and risk, so it is more expensive than a bank loan and the terms are shorter. Expect the total cost to reflect several elements rather than a single advertised rate.
| Element | What to expect |
|---|---|
| Interest rate | Higher than a mainstream mortgage, reflecting the short term and risk |
| Loan term | Typically months rather than years |
| Establishment and legal fees | Upfront costs that can be significant on a short loan |
| Security | Registered against property, often as a first or second mortgage or via caveat |
| Exit | A defined repayment event, usually a sale or refinance |
The risks to weigh up honestly
Because much private lending is arranged for business or investment purposes, it may not carry the same consumer protections as a regulated home loan. That makes reading the contract, and understanding the fees, non-negotiable. The main risks are simple to state.
- The cost is high, so time genuinely is money on a private loan.
- If your exit slips, extension fees or default interest can escalate quickly.
- The property securing the loan is at risk if you cannot repay as agreed.
Private lending rewards a clear plan and punishes a vague one. If you cannot describe your exit in a sentence, the loan is probably not ready.
Where to read next
If your situation is not actually urgent, a mainstream loan will almost always be cheaper, so compare first with a prime home loan or, if you are self-employed, a low doc loan. Investors buying through super should read SMSF home loans, and our glossary defines the terms lenders use along the way.
Common questions
What is a private mortgage?
A loan funded by a private individual, a fund or a non-bank lender rather than a mainstream bank, secured against property. Decisions rest mainly on the security and the exit rather than on documented income, so they can settle quickly. Rates and fees are considerably higher, and terms are usually short.
When does a private mortgage make sense?
Where speed or an unusual situation makes bank lending impractical and there is a clear, dated exit: a settlement deadline, a property sale in progress, or a refinance already approved but not yet funded. The exit is the whole decision. Without a credible one, a short expensive loan becomes a long expensive problem.
What do private mortgages cost?
Well above bank pricing, and the headline rate is only part of it. Expect establishment fees, legal costs on both sides, valuation and often a line or exit fee. Ask for the total cost over the expected term in dollars rather than comparing rates, because the fees frequently outweigh the interest on a short loan.
What are the risks?
The security is your property, so a failed exit can mean losing it. Terms are short, so there is little room if a sale or refinance slips. Enforcement can move faster than with a bank. Have a solicitor review the contract before signing, and never enter one without a written plan for repayment.
Sources and further reading
- ASIC Moneysmart, borrowing basics. Explains secured lending, interest costs and the importance of reading terms before signing.
- Australian Securities and Investments Commission, credit licensing. Consumer-purpose credit is regulated; private lending for business or investment purposes may fall outside the same protections, which is why terms vary widely.
- Reserve Bank of Australia, financial stability material. Provides context on the role of non-bank lenders within the broader Australian mortgage market.
General information only. This guide explains how home loans work in Australia in broad terms. It is not financial or credit advice and does not take account of your objectives, situation or needs. Seek Mortgages is an independent publication, not a mortgage broker, lender or financial adviser, and we do not arrange loans. Rates, caps and eligibility rules change often, so always confirm the current detail with the relevant provider or regulator, and consider getting advice from a licensed professional before you act.
More plain-English explainers
Related guides from Seek Mortgages, each one general information that is dated and backed by cited sources.
SMSF home loans and the LRBA structure
Buying property inside a self-managed super fund, what a limited recourse borrowing arrangement is, and the rules the ATO enforces.
Getting approvedHome loans after credit problems
How defaults and repayment history are recorded, how long they stay on file, and the realistic path back to a mainstream loan.
Loan typesCommercial property loans explained
How finance for shops, offices and warehouses is assessed: lower LVRs, interest cover ratios, lease doc and full doc options, GST, and the costs to weigh up.
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