Finance question
Does my first lender have to agree to a second mortgage for my business?
It depends on the state, and older commentary differs from newer. Legal commentary says first mortgagee consent is no longer required to register a second mortgage in most states, with Victoria the exception, where the first lender must nominate the title through PEXA. Many first lenders still ask for a deed of priority, so allow time for it. Ask your solicitor which applies to your title.
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The short answer
The law and the first lender's habits are not the same thing
A second mortgage lets a business owner borrow against a home that already has a home loan, without touching that home loan. Whether the first lender has to agree depends on where the property is. Our second mortgage guide summarises a law firm's position: no consent needed in New South Wales since 11 October 2021, in Queensland (a ban on second mortgages in the first mortgage is void under s 78 of the Land Title Act), in Western Australia or in the ACT. Victoria needs title nomination from the first mortgagee through PEXA, which the first lender cannot refuse but can treat as a default. Tasmania and the Northern Territory need the first lender's cooperation where a paper title is on issue.
In practice a deed of priority is still common. A 2017 New South Wales article said consent was then usually needed and came with extra legal cost and delay, which shows why the date of any commentary matters. One lender's page says consent is usually by deed of priority and runs in parallel with the application, another says the first mortgage holder must consent, and a broker guide calls consent the most common failure point. Where a deed is needed, expect fees from both lenders' lawyers and extra days. Some lenders use a caveat instead, which needs no consent but costs more and runs shorter.
The other limit is the combined LVR: the first loan plus the new advance, divided by the property value. The caps published in our second mortgage guide run from 65% to 75%, and a valuation, sometimes a forced sale value, can come in below what you expect. Ventas is a broker across 40+ lenders, not a lender, and there is no upfront fee to you. The lender pays us on settlement.
Do you qualify?
What a second mortgage lender looks at.
Enough equity
The first loan plus the new advance has to sit under the lender's combined LVR cap.
A clear exit
A refinance, a sale or a settlement that repays the loan.
A business purpose
Funds go to the business, often through a company or trust borrower.
A first loan in order
A first mortgage that is behind on repayments narrows the field quickly.
Why consent can still delay a settlement
Two sets of lawyers
A deed of priority means fees and sign-off from both lenders' solicitors.
State rules differ
Victoria works through PEXA nomination, other states differ again.
A caveat avoids the deed
It needs no consent, but it is shorter and costs more.
A worked example
A home is valued at $1,000,000 with a $500,000 first mortgage, and the owner needs $200,000 for the business. At a 70% combined cap, total debt can reach $700,000, so a second of $200,000 fits. If the lender's cap is 65%, total debt tops out at $650,000 and the second at $150,000, which is $50,000 short. The owner then checks the cap before choosing a lender. Illustrative only.
Common questions
Frequently asked questions
Can my first lender refuse a second mortgage?
In most states the law no longer lets the first lender block registration, but the loan contract may treat it as a default and the first lender may ask for a deed of priority. Victoria works through title nomination on PEXA.
What is a deed of priority?
It is an agreement between the two lenders setting out who is repaid first and how much each can claim. It usually means legal fees from both sides and a few extra days.
Is there a way to avoid asking the first lender?
Some lenders use a caveat instead, which needs no consent. It usually costs more and runs for a shorter term, so it suits a defined exit inside a few months.
Who decides what applies to my title?
Your solicitor or conveyancer. The rules depend on the state and the type of title, so ask them before you plan a settlement date.