Second Mortgage on a Commercial Property

Why banks decline second mortgages on commercial property

Banks are reluctant to lend against second mortgages on commercial property because it increases their risk profile. If you go into default, they'd have to wait behind the first mortgage lender before recovering their funds. On top of that, banks have tight lending criteria: they want to see strong business financials, consistent cash flow, and a property in a prime location.

Even if your property is worth $3 million and you only want to borrow $500,000, the bank's answer is often no — especially if your business is newer, or your documentation is limited. The conversation ends before it starts.

How private lenders look at this differently

Private lenders take a simpler approach: they focus on the equity in the property and the strength of the first mortgage. If there's enough equity and a clear purpose for the loan, they'll consider it. Here's how they think:

The property is the security. They assess the commercial property's value independently and work out how much equity is available after the first mortgage. If the LVR sits comfortably (usually under 85%), they're confident.
The purpose matters. A second mortgage to fit out a new wing, or fund an expansion, or refinance working capital is easier to justify than vague borrowing. Clear intent means lower perceived risk.
Speed and flexibility. Private lenders can move quickly and often accept lo doc — you don't need perfect financial statements to qualify. They're willing to work with owner-operators and business owners with patchy documentation.

Dealing with something similar?

Tell us your situation in a few words and we'll show you what's possible.

Check Your Options

What a typical deal looks like

Illustrative example — not a real case

A medical practice owner in Melbourne owns a commercial building valued at $3 million. The first mortgage is $1.5 million with a bank. The practice is growing and needs $500,000 to fit out a new diagnostic wing — but the bank won't increase the existing loan because of documentation gaps and a recent change in ownership structure.

A private lender assesses the property at $3 million and agrees to a second mortgage of $500,000. At that level, the total borrowing is $2 million against a $3 million asset — a loan-to-value of 67%. The second mortgage is set at 5.8% p.a. with a 10-year term. Settlement happens in five business days. The fit-out proceeds, the practice expands, and the owner has the working capital they need.

Typical commercial second mortgage

Property type

Office, warehouse, retail, medical facility

Loan size range

$25,000 to $80,000,000

Interest rate

From 4.99% p.a.

LVR (commercial)

Up to 85% of property value

Loan term

1 month to 30 years

Settlement speed

1–5 business days

Ranges shown are across our full panel of specialist lenders. Your deal may fall within a narrower range depending on the specifics.

What lenders want to see

Here's what makes a strong application for a commercial second mortgage:

Clear property valuation. A recent valuation or solid evidence of the commercial property's current market value. The higher the property value, the more equity room you have for a second mortgage.
Details of the first mortgage. Outstanding balance, lender, term, and interest rate. The lower the first mortgage relative to property value, the more room for a second loan.
Clear purpose. What is the second mortgage for? A fit-out, refurbishment, expansion, or refinancing of existing debt? The clearer the purpose, the more confident the lender.
Exit strategy. How will the loan be repaid? Usually through business cash flow, or by refinancing once business conditions improve. Being clear about this strengthens the application.

When this might not work

A commercial second mortgage might not be suitable if:

The total borrowing (first mortgage + second mortgage) pushes the LVR above 85%. There's not enough equity cushion to satisfy lenders.
The property is in a poor location or difficult to value. Lenders are cautious about properties that are hard to sell or re-let.
There's no clear repayment path. If the business is struggling and there's no plan to improve cash flow, lenders won't proceed.

What our panel can offer for this scenario

Our panel includes specialist private lenders who actively fund second mortgages on commercial properties. Across these lenders:

Up to 85% LVR (loan-to-value) on commercial property
Settlement in as little as 1–5 business days
Lo doc options available — you don't need full financial statements
Flexible terms from 1 month up to 30 years
Coverage across all Australian states and territories for all property types

The exact lender and terms depend on your specific situation. Describe your situation and our AI will match you with the most suitable lenders.

How to get a second mortgage on commercial property

The process is straightforward:

Step 1: Describe your situation. Tell us what commercial property you own, roughly what it's worth, what the existing mortgage is, and what you need the second mortgage for. You don't need perfect information — the basics are enough.
Step 2: Get matched. Our AI checks your scenario against specialist lenders on our panel and shows you which ones are likely to consider a second mortgage, with plain-English explanations of why.
Step 3: Move forward. Pick the lender that fits, and connect directly. Most can provide an indication of interest within a few days, with settlement to follow quickly.

Common questions

Can I get a second mortgage on commercial property?

Yes, absolutely. Many commercial property owners use second mortgages to fund fit-outs, expansions, or refinance debt without disrupting the primary loan. The property is the security, so commercial buildings, warehouses, retail spaces, and offices all qualify — as long as there's equity available.

What LVR is available for commercial second mortgages?

For commercial property, specialist lenders on our panel typically lend up to 85% LVR (loan-to-value). This means if your property is worth $1 million, a lender might advance up to $850,000 in total borrowing (first mortgage + second mortgage combined). The higher your equity, the more comfortable lenders are with the deal.

Does the first mortgage lender need to approve a second mortgage?

No — you don't need the first lender's permission to take out a second mortgage. However, the second mortgage will be registered as a second charge on the property. Your first lender will become aware of it through the title register, but they can't veto it. The key is ensuring there's enough equity to satisfy both lenders.

Can I get a second mortgage on a retail or industrial property?

Yes. As long as the property has clear equity and value, specialist lenders will consider second mortgages on retail, industrial, warehouse, office, and other commercial properties. The terms and rates may vary depending on the property type and how easily it could be sold if needed.

What happens if I default on a commercial second mortgage?

If you default, the second mortgage lender can take legal action to recover the debt, ultimately leading to the sale of the property. However, as a second charge, they only get paid after the first mortgage is settled. This is why they're more cautious about LVR — they need enough equity to protect their position.