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Second mortgages

What are second mortgage interest rates for business?

Updated Sept 2026 · Reviewed by The Lienhouse team

Indicatively, business second mortgages start from around 0.975% a month, roughly 11.7% a year, on strong security at moderate leverage, with an establishment fee around 2%. The rate rises with combined LVR, weaker security and a less certain exit. It sits well below a caveat loan, and above a first mortgage, because of where the lender ranks.

Key takeaway
Business second mortgages indicatively price from 0.975% a month plus about a 2% fee; combined LVR, security quality and the exit drive the rate, which sits between first mortgage and caveat pricing.

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Pricing in secured lending follows priority. The first mortgagee is paid first and charges least. The second mortgagee is paid next and charges more. A caveat lender, with a lighter form of security again, charges more still. Knowing where a second mortgage sits in that order explains most of its price.

The indicative range

The rates and fees page shows second mortgages from 0.975% a month, up to around 75% combined LVR, over 6 to 24 months, with an establishment fee around 2%. For comparison, caveat loans are shown from 1.65% a month and private first mortgages from around 8% a year. All figures are representative and subject to assessment.

What moves the rate

  • Combined LVR. The strongest driver. At 55% combined the lender has a thick equity cushion. At 75% it does not.
  • Security. Metropolitan commercial, industrial and investment residential price best.
  • The first mortgage. A performing bank loan with a deed of priority in place is lower risk than a private first mortgage in arrears.
  • The exit. A contracted sale or approved refinance prices below a plan that is still a plan.
  • Term and size. Very short terms and very small loans carry proportionally higher cost.
  • Interest structure. Monthly-paid interest can price a little lower than fully capitalised interest, because the lender’s exposure does not grow.

A worked cost

$500,000 for 12 months at 0.975% a month is about $58,500 in interest, plus a 2% establishment fee of $10,000, plus legal, valuation and bank consent costs. If the same money kept a $2,000,000 contract alive, cleared an ATO debt accruing non-deductible interest, or funded stock at a 25% margin, that cost is easy to justify. If it would simply fund losses, it is not.

After tax

Interest on business-purpose borrowing is generally tax deductible, which lowers the effective cost for a profitable company. Confirm with your accountant. See is private loan interest tax deductible.

Compare the whole offer

The monthly rate is one line. Also compare the establishment fee, legal costs, any line or monthly fees, the default rate, minimum interest periods and extension terms. See how to compare private loan offers.

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FAQ

Why is a second mortgage dearer than my bank loan?

The second mortgagee is repaid only after the first in a sale, so it carries more risk, and it is lending on lighter documentation with a faster turnaround.

Is the rate fixed or variable?

Most private second mortgages are fixed for the term, which is usually 6 to 24 months.

Can I lower the rate?

Yes, by borrowing less relative to value, offering better or additional security, showing a contracted exit, and obtaining the first mortgagee's consent and a deed of priority.

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