Private first mortgage vs bank commercial property loan

In one paragraph

A private first mortgage and a bank commercial property loan can both sit in first-registered position over the same asset, but they are built for different borrowers. A bank commercial property loan generally offers the lowest pricing for a borrower who fits squarely within policy — clean financials, straightforward serviceability, a conventional asset — assessed over several weeks. A private first mortgage trades some of that pricing advantage for speed, flexibility on documentation, and a willingness to look past a complicating factor a bank's policy would otherwise decline on, making it the more common choice for a time-sensitive purchase, an unconventional asset, or a borrower whose file needs a story told rather than a box ticked.

Side by side

When a private first mortgage wins

A private first mortgage wins wherever timing or complexity rules out a standard bank process. A purchaser with an auction settlement or a tight contractual deadline cannot wait six to eight weeks for a bank's credit committee, and a borrower with a recently changed structure, a non-standard asset, or income that does not map cleanly onto a bank's serviceability model often finds a private lender willing to assess the same file on its actual merits rather than declining it on a policy technicality. Private lenders active in first mortgage lending will also generally look past a single explained credit event that a bank's automated or conservative policy would treat as an outright exclusion, provided the security and the borrower's broader story hold up.

When a bank commercial property loan wins

A bank wins on price whenever the file fits its policy comfortably and the timeline allows for a full assessment process. Borrowers with strong, well-documented financials, an established trading history, and no urgency pressing on settlement generally pay less over the life of the loan through a bank than through a private lender, and for a long-term hold this pricing difference compounds meaningfully. Banks also tend to offer longer standard terms and a broader range of ancillary banking products, which can matter for a borrower consolidating their commercial banking relationship around a single facility rather than optimising purely for the loan itself.

Borrowers should also be conscious of how their choice today affects the story they present at the next refinance, since a track record of on-time repayment under a private facility is generally viewed favourably by a subsequent bank lender, while a history of delays or defaults, even under a private facility taken on for entirely understandable reasons, can complicate a later move to bank terms. Some brokers structure a private first mortgage specifically with the intended bank refinance in mind from the outset, choosing a private lender whose facility terms and documentation are known to transition smoothly to a specific bank's requirements, rather than optimising purely for the private facility's own terms in isolation. Borrowers with a genuinely long-term hold in mind, rather than a bridge to a future refinance, should weigh the private lender's ongoing rate honestly against a bank's, since the pricing gap compounds meaningfully the longer the facility remains in place beyond its original, shorter-term purpose.

Can you use both

Yes, and it is a common sequence rather than an exception. A private first mortgage is frequently used to settle a purchase inside a tight deadline, with a bank refinance arranged afterwards once the bank has time to run its full process and the urgency of settlement day has passed. Borrowers considering this path should confirm the private facility carries no material exit fee or lock-in that would penalise an early bank refinance, and should start the bank application in parallel with the private settlement rather than waiting until after it completes, to avoid paying private pricing for longer than necessary.

Related

Private first mortgages · Commercial property loans · LVR · Serviceability