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There are two different questions hiding in this one. Will the land registry register a second mortgage without the first lender agreeing? And does the borrower’s contract with the first lender allow it? The answers are not the same.
What the registries require
Historically, registries would not register a second mortgage unless the first mortgagee produced the title or gave written consent. That has changed. Queensland does not require it, and NSW Land Registry Services stopped requiring it in October 2021. Practice in other states varies, and with paper titles gone the old lever of holding the certificate of title has largely disappeared. So in several states registration is mechanically possible without the bank’s involvement.
What the bank’s mortgage requires
This is where it bites. Nearly every bank mortgage contains a covenant that the borrower will not create another mortgage or charge over the property without the bank’s prior written consent. Registering a second mortgage in breach of that covenant is an event of default. The bank may never act on it, but the right exists. The broader position on how banks respond is in can you lend behind a bank.
Why second mortgage lenders ask anyway
A second mortgagee wants more than registration. It wants a deed of priority that caps the amount the bank ranks ahead for, so later advances by the bank do not erode the equity behind it. That deed only exists if the bank is at the table. For that reason most professional second mortgage lenders make bank consent a condition.
How banks respond
Responses depend less on the brand than on the division and the borrower’s conduct. Commercial and business banking teams deal with subordinated debt routinely and usually consent where the security is sound and the loan is performing, for a fee. Residential home loan teams are more likely to refuse as a matter of policy. A bank that is already worried about the account may refuse, or use the request to review the facility. Ask your banker informally before a formal request goes in.
If the answer is no
- A caveat loan. It does not need registration as a mortgage, and is the usual fallback for short needs. It prices higher. See caveat loan vs second mortgage.
- Refinance the first mortgage. One private or non-bank first mortgage replaces the bank loan and provides the extra funds.
- Different security. Another property with a more accommodating first mortgagee, or none.
General information only. The covenant in your own mortgage is what governs, and a solicitor can confirm it quickly.
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Which banks consent to second mortgages?
Policies change and vary by division, but business and commercial banking teams at the major and regional banks consent more readily than residential home loan teams, and non-bank lenders vary widely. The quickest way to find out is to ask your banker before applying.
How long does bank consent take?
From a few days to several weeks. It is the single biggest variable in a second mortgage timeline, so the request should go in on day one.
What if my bank refuses?
The options are a caveat loan, which does not need registration behind the bank, a refinance of the first mortgage to a lender that will sit alongside or provide the whole amount, or security over a different property.