Refinance of a private loan back to a bank

The situation

The following is an anonymised composite reflecting a recurring pattern, not a specific settled deal. A property investor used a private first mortgage to settle a time-sensitive purchase eighteen months ago, when their financials did not yet reflect a full year of a new income source and a bank process would not have completed in time. With updated financials now showing a full year of stronger, verifiable income, they want to refinance to standard bank terms.

Why it's hard

The private facility, while it solved the original timing problem, carries a materially higher rate than a bank would offer for the same security today, and every month spent on private terms rather than a bank facility represents an ongoing cost the borrower is keen to stop paying as soon as the file genuinely qualifies. Coordinating the timing — waiting for updated financials to be finalised and lodged, or for a specific track record period to be reached — while not paying private rates for longer than necessary requires some planning.

How it can be structured

A standard bank commercial property loan, assessed on the borrower's now-current financials and the established, clean repayment history on the existing private facility, is the target structure, refinancing and discharging the private mortgage in full; the exit is simply the bank facility replacing the private one at settlement. Borrowers should begin the bank application process before their private facility's own term or lock-in period ends, since bank timelines of several weeks mean starting only once already keen to switch can mean paying private rates for longer than necessary. Demonstrating a clean, on-time repayment history on the private facility itself is also a positive factor most banks will consider, showing the borrower has managed the interim facility responsibly.

Borrowers should request their private lender's discharge figure well ahead of the intended bank settlement date, since this figure needs to be confirmed precisely for the bank's own documentation and can otherwise become a last-minute delay in an otherwise straightforward refinance. Where the private facility carries a defined term rather than running month to month, timing the bank application to complete just before that term's expiry, rather than significantly ahead of it or after it has lapsed into a higher default rate, generally produces the best overall outcome. Some borrowers find that engaging a broker who arranged the original private facility to also manage the bank refinance streamlines the process, since that broker already holds the property's history, valuation records and the borrower's financial documentation from the original transaction. Banks will also want to see a clear explanation for why private finance was used originally, and a well-documented, sensible reason, such as a tight settlement deadline at the time rather than a credit issue, is generally read favourably rather than viewed with suspicion.

What it typically costs

The refinance itself is priced at standard bank commercial property rates once approved, quoted on enquiry once the bank has reviewed updated financials and the property. Borrowers should confirm whether the private facility carries any exit fee or early repayment cost, and factor this into the timing decision alongside the bank's own establishment costs.

Timeline

1. Same day — scoping call confirming the private facility's terms, updated financials and refinance goals.
2. 5–10 business days — document collection and bank application preparation.
3. 15–25 business days — bank assessment and credit approval.
4. 5–10 business days — settlement and discharge of the private facility.

Questions we'd ask you

1. What are the current terms and any exit fee or lock-in period on your existing private facility?
2. What updated financials do you now have that were not available when the private facility settled?
3. Has your repayment history on the private facility been clean and on time?
4. Is there a specific date by which you would like the bank refinance to complete?
5. Has your income or trading position changed further since the private facility was arranged?

Related

Private first mortgages · Commercial property loans · Refinance · Exit fee