WHY YOU MIGHT CONSIDER A SHORT-TERM FIRST MORTGAGE
Let’s look at short-term first mortgages: what they are, their benefits and common uses.
What is a short-term first mortgage?
In the case of mortgages, or loans secured against property, ‘first’ refers to priority. That is, the first mortgage lender has the primary claim to be repaid if the property is sold or the loan defaults. Also referred to as the ‘first registered interest,’ the first mortgage holder has priority over any other claims against the property (except for some government and statutory claims, such as land tax).
Historically, first mortgages have been provided by big banks for a long term (often 15 years up to 30 years). Though it’s becoming increasingly clear that longer-term loans do not always suit everyone’s circumstances –particularly for borrowers who may only need access to funds for a shorter period of time or borrowers with affected credit history.
The good news is that there are a number of alternative and private lenders in Australia who provide short-term first mortgages, which typically have a duration of two to 36 months.
The benefits of using a first mortgage for short-term funds
Short-term first mortgages from private lenders have many benefits, including the following:
- First mortgages in Australia usually are more competitive than other loans (such as caveats or second mortgages)
- A short-term first mortgage can be organised and settled very quickly (often within 3 to 5 days)
- You can borrow to a higher amount (otherwise known as ‘loan to value ratio’ or ‘LVR’) compared to other mortgage loans
- Private lenders usually require minimal paperwork for first mortgages in Australia and are supportive of self-employed applicants or borrowers with ‘less-than-perfect’ credit history
- Short-time first mortgages are available from an increasing number of lenders, and you can often apply online, which is quick and easy
Why you might use a first mortgage for short-term funds
There are a range of scenarios where you might consider a first mortgage to meet short-term financial needs, including:
- Releasing equity in your home to fund renovations to prepare your property for sale
- Paying off urgent, sizable and often unexpected bills
- Completing a small residential subdivision or development to cover costs, including construction, before funds from sales are received
Some borrowers in Australia may also consider a short-term first mortgage on residential property to raise funds needed for a business. Common uses for business funding include providing working capital (otherwise known as cash flow) for a short period to cover the purchase of stock, slow customer invoice payments, outstanding tax bills, and so forth.
How to apply for a short-term first mortgage loan
Our short-term first mortgage loans are flexible, require minimal documentation and are usually approved within days. We also accept applications from borrowers with affected credit history.
At Mango Credit, you can submit an enquiry by phone, email or apply online. Upon receiving your enquiry or application, we email an indicative quote that details the interest rates, costs, loan structure and document requirements. If you agree with the proposal, we then issue a formal and more detailed letter of offer. You return the signed proposal with the required documents, and we ask our solicitors to issue security documents or order a valuation if needed. Once we receive the security documents, we settle by electronic transfer of funds. Click here to apply for a short-term first mortgage loan.
What should you consider before getting a first mortgage loan?
- It sounds simple, but there needs to be a sound reason for the loan. And most lenders will require an expectation of how the proceeds will be used.
- Work out your repayment schedule to make sure you can afford to repay the loan on time.
- Consider your credit score, as this will affect the type of lender that will consider your application. For instance, if you have a high credit score, you’re considered a lower risk applicant. Conversely, if you have a lower score, you’ll be seen a higher risk to the lenders. Typically speaking, banks favour higher credit score applicants. Non-bank, specialist, private lenders and fintechs are more receptive to borrowers with lower credit scores.
- Compare lenders and the types of loans they offer, including lending policies, interest rates, and other fees.
- Get your documentation in order in advance, as this can help expedite the loan process (keeping in mind that each lender will have different requirements).
Which mortgage loan should first home buyers consider?
Here are some common first-time homebuyer mortgage options:
- Construction loan. A construction loan provides funding so you can build your home.
- Low-doc loan. This is ideal for self-employed borrowers who want to apply for a mortgage loan but don’t have the standard paperwork. A low-doc loan requires minimal documentation.
- Introductory loan. An introductory loan offers low-interest rates (also known as honeymoon rates) which typically last for around 12 months before they increase.
- Interest-only home loan. This type of mortgage requires the borrowers to pay down only the interest for a certain period.
- Fixed and variable home loans. Fixed mortgages have fixed interest rates throughout the loan term, whereas variable mortgages have fluctuating rates that are parallel to the market.
- Split loan. A split loan allows you to make a part of your loan fixed and the other half variable.
- Guarantor home loan. With a guarantor home loan, you ask a family member to be your home loan guarantor.
And don’t forget to check if you’re eligible for any government initiatives for first home buyers.
How much money can I borrow for a mortgage?
Again, this varies from lender to lender as well as the type of lender (i.e. whether it’s a bank, private, specialist lender or a fintech). It will also be affected by your income, living expenses, whether you have dependents, or if you have security (usually meaning another property), to name a few.
How long do I have to pay off a mortgage?
Mortgage terms vary greatly depending on whether you’re borrowing for personal or business use, along with the purpose of the loan. A long-term loan from a traditional lender, like a bank, can go for up to 30 years. Conversely, there’s an increasing demand for short-term first and second mortgages that typically have a term of two to 36 months.
How do I calculate mortgage repayments?
Mortgage repayments are calculated by various factors, including the loan amount, interest rate, repayment frequency, loan type, and loan length. Mortgage calculators are widely available to provide a clearer indication of the repayment schedule.
What documentation do I need for a first mortgage loan?
Each lender will differ regarding the documentation required to secure a first mortgage loan. Common requirements include business and personal bank statements, tax returns, business financial statements, business plan, certificate of incorporation and other business legal documents. The good news is that we only require your most recent council rates notice and your most recent existing mortgage statement when considering your loan application.
How long does it take for a first mortgage loan to get approved?
Processing times for a first mortgage loan largely varies among lenders. Here at Mango Credit, an application gets approved usually within 24 hours, and funding is typically available within 3-5 days from the approval of the application.
How do I apply for a first mortgage loan?
Different lenders have varying first mortgage loan application requirements and processes. At Mango Credit, you can submit an enquiry by phone, email or apply online. Upon receiving your enquiry or application, we email an indicative quote that details the interest rates, costs, loan structure and document requirements. If you agree with the proposal, we then issue a formal and more detailed letter of offer. You return the signed proposal with the required documents, and we ask our solicitors to issue security documents or order a valuation if needed. Once we receive the security documents, we settle by electronic transfer of funds. Click here to apply for a short-term first mortgage loan.
Get started! Contact us today.
We offer short-term first mortgages, fast second mortgages, caveat loans, home equity loans and business loans. And you can quickly and easily apply online.
If you own property, a short-term first mortgage is increasingly being considered as a way to obtain funds relatively quickly for personal or business use. You can apply online for a short-term first mortgage. This form of funding can be used for a short period of time (2 to 36 months) for a variety of purposes.
Why now might be the right time to get a short-term first mortgage. Read more >