Second Mortgage in Australia

A second mortgage in Australia is a secured secondary home loan. The main mortgage is often called the first mortgage because it is the first one to be repaid. The second mortgage is generally borrowed against the home equity. Thus, this mortgage is often called a home equity loan.

Although, home equity loan and the second mortgage are synonymous, the actual definition may vary. The home equity loan is any debt while secondary mortgage refers to the actual home loan.

The Interest Rate of Second Mortgage In Australia

The interest rate of the second mortgage is usually higher than that of the first one. However, it all depends on banks.

If the borrower have an adequate security, excellent credit record and a solid income then the interest rate and fees will be comparable to the first mortgage. However, the interest and the charges will increase if the above items are not fulfilled.

The Reason for The Second Mortgage in Australia

Normally, the borrower needs the second mortgage for the same reason as the home equity loan. Examples are: renovations, investments, payment for studies etc.

The amount of this secondary loan is based on the value of the property minus the outstanding balance for the main mortgage. Since the properties appreciate in value the funding of the second mortgage is substantial.

What Do Banks Require For The Second Mortgage In Australia?

Generally, lenders evaluate the second mortgage in Australia based on:

  • Good equity in the first mortgage (large difference between the property value and the outstanding mortgage)
  • Excellent credit history
  • Secured income
  • Low debt

Lenders For The Second Mortgage In Australia

Almost all major lenders provide loans for the second mortgage in Australia. In most cases it depends on how the loan can be secured. Some financial companies specialise in second mortgage loans. Second Mortgage, FreedomLoans and CaveatFinance are lenders which directly deal with home equity and second mortgages.

However, care needs to be taken when considering the lender for the second mortgage in Australia. Some companies insist on refinancing your loan with them. You do not need to refinance your mortgage to get the second home loan. Otherwise, choose a financially more secure lender (in this case major banks).