First mortgage business loans: borrowing from the front of the queue

Few things impress a lender more than a property with nothing owing on it, yet plenty of owners never use that advantage. Many owners with a paid-off home or a debt-free workshop still reach for expensive unsecured money because it feels simpler. A first mortgage puts that clear title to work at the front of the queue, where pricing is kindest.

What makes a mortgage “first”?

Each state’s land registry records registered interests on the title, and between registered mortgages priority generally follows the order of registration. The first mortgagee is paid in full from a sale before a second mortgagee sees a cent. Lenders price that certainty: the same property supports a bigger loan, more cheaply, when the lender ranks first.

Registration is now almost entirely electronic. New South Wales, for example, scrapped paper certificates of title when reforms commenced on 11 October 2021; lenders there confirm ownership and existing interests by searching the title online. You don’t need to find a dusty paper title in a drawer; your solicitor or the lender orders a title search instead.

Which situations suit a first mortgage?

Three patterns come up again and again.

1. The property is unencumbered. No existing lender, so nobody else’s consent or payout is involved. The full equity is available, subject to the lender’s loan-to-value limit for that property type. This is the cleanest first mortgage deal there is.

2. Only a sliver of the old loan remains. If a home loan has $60k left on it, refinancing it into one facility with the new business funds is usually simpler than layering a second lender behind it.

3. Consolidating several debts. An owner juggling an old home loan, two online business loans and a tax debt may be better off with one first mortgage that clears the lot. Fewer repayments, one set of fees, and usually far less paid each month. See our page on consolidating business debt.

Where a first mortgage is a poor fit: you have a large home loan on excellent terms and only need a modest top-up. Replacing that loan to raise $150k drags the whole balance onto the new lender’s pricing. A second mortgage doesn’t disturb the cheap loan and prices only the new money.

What does refinancing actually involve?

This is where first mortgage refinances slow down or get expensive, so plan for it.

• Break costs. Where some or all of the existing debt is fixed, paying it out early can trigger break costs. Ask your existing lender for a written payout figure, including any break cost, before committing.
• Discharge lead time. Your current lender needs a discharge authority and time to prepare for settlement. Build in a buffer, especially if the funds are needed for a deadline.
• Discharge and registration fees. Small in the scheme of things, but they belong in your total-cost comparison.
• Offset and redraw. If you’ve built up money in an offset account or redraw, know what happens to it on refinance.

Model both paths, a full refinance and a stand-alone top-up behind the existing lender, through our loan cost comparison calculator using real quotes. The answer is usually obvious once you see total dollars side by side. Our detailed first vs second mortgage comparison walks through the trade-off.

Have a clear or nearly clear title and a business purpose in mind? Share the basics with our team; it’s quick and your credit file isn’t touched.

How do lenders size and assess the loan?

What’s assessed	How it affects your loan
Property value	Set by valuation; drives the maximum loan amount
Property type and location	Houses in metropolitan areas get the most generous treatment; vacant land and specialised buildings get less
Loan-to-value ratio	Each lender caps the loan as a share of value for each property type
Ability to repay or exit	Banks focus on servicing from income; private lenders weigh the exit plan heavily on short terms
Purpose	Must be for the business, such as working capital, a purchase, a tax bill or refinancing business debt
Borrower and guarantors	ID, credit history, company and trust details where relevant

Check your own figures with our LVR calculator before you talk to anyone.

Bank, non-bank or private?

Banks write a great many first mortgage business loans, and when your financials are strong and up to date they’re often the best-value choice. Take a bank offer seriously.

Non-bank lenders fill the space where the business is sound but the paperwork doesn’t fit a bank’s boxes: recent tax returns not lodged, self-employed income that’s hard to evidence, or a credit blemish. Private lenders go further still, lending mainly on the property and the exit, typically over shorter periods measured in months rather than decades. They cost more, but they move quickly and can say yes when others won’t. If your bank has declined you, our guide to borrowing against your home or against commercial property explains the options.

What will it cost?

The ongoing price is typically the lowest of any property-secured option, because the lender ranks first. Upfront costs include valuation, the lender’s legal fees, mortgage registration and any establishment fee; refinances add the outgoing lender’s discharge costs and possibly break costs. This directory never quotes rates. Ask each lender to put the total dollars payable, for as long as you realistically expect to keep the loan, in writing.

Applying, step by step

1. Get a current title search or have your solicitor order one.
2. If refinancing, ask your lender for a written payout figure.
3. Decide the amount: the business need plus any debt being cleared plus costs.
4. Gather ID, ABN, BAS or financials, and statements for any debts being refinanced.
5. Valuation, offer, signing, then settlement through the electronic lodgement network.

Putting a clear title to work

A property with no debt against it, or very little, opens doors that many business owners don’t realise are there. The trick is matching it with a lender whose rules fit how your business looks on paper right now.

That’s the job our team does every day. There are only a few questions, a minute or so of your time, and enquiring leaves your credit history alone. Your information isn’t shopped around to lender after lender; one of our specialists goes through it personally and phones you. Be straight with us about any debt on the title (zero is a perfectly good answer) and the exact business purpose, because that’s what lets us lead with the right structure.

Find out what a first mortgage could raise →