Second mortgage vs refinancing: keep your bank loan and access equity fast
Why a business owner sitting on a good bank rate releases equity behind that loan rather than refinancing it, and the three ways the second mortgage is paid out later: consolidating both loans into one new first mortgage, business cash flow, or the sale of an asset.
Why not just refinance?
Because refinancing to release a contained amount puts the whole existing loan back on the table. If the first mortgage was written when money was cheaper, carries break costs, or the current financials would not support a new full application, refinancing is the expensive way to solve a small problem. A second mortgage leaves the good loan alone and is priced only on the money actually needed.
It is usually faster too: a title search, the first lender's consent where it is required, and a set of documents, rather than a full bank credit assessment.
The three ways a second mortgage ends
- Consolidation. Both mortgages are refinanced into one new first mortgage later, once the business can carry a full application again.
- Business cash flow. The loan is paid out of trading, typically from a receipt that lands later: a settlement, a season or a signed contract.
- The sale of an asset. The security property or another one.
The video is the short version. The written guide has the detail: second mortgage business loans.
To talk it through about your own property, ring a Lending Manager on 1300 93 83 87, Mon–Fri, 8:30am – 5:30pm Melbourne time.
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