First mortgagee consent: does your bank have to agree to a second mortgage?

Why does the first lender’s view matter at all?

A second mortgage doesn’t touch your first loan’s balance or repayments, so it’s fair to ask why the first lender gets a say. There are two reasons, one contractual and one practical.

The contract. Most residential and commercial mortgage contracts include a covenant along the lines of “you must not mortgage, charge or otherwise encumber the property without our consent.” Granting a second mortgage without that consent can be a default under your first loan, even if every repayment is on time. Nobody wants to fix one funding problem by creating another.

The title. Registration of land in Australia is now largely electronic. In some states, the first lender holds electronic control of the title while its mortgage is registered, which means its cooperation is needed in practice before another mortgage can be lodged.

That’s why nearly every second-mortgage file includes a step to deal with the first lender.

Where do you find the clause in your own loan?

Look in the mortgage terms or the general loan conditions your lender issued at settlement, usually in a section called something like “dealing with the property”, “security” or “your obligations”. The words to look for:

• further mortgage, second mortgage or subsequent security;
• encumbrance or “encumber”;
• dealing with the land;
• priority, or “deed of priority”.

If you can’t find the document, your lender can resend it, or we can explain what to request. You’ll also want your latest loan statement; our guide to reading your home loan statement shows what each figure means for a second mortgage.

What does a first mortgagee consent letter actually say?

Wording varies, but a typical consent covers:

Item	What it does
Acknowledgement	The first lender notes that a second mortgage will be registered.
Priority amount	Caps what the first lender can claim ahead of the second lender, often the current limit plus a margin for interest and costs.
Notice obligations	Sometimes each lender agrees to tell the other about defaults or enforcement.
No change to your loan	Your first loan’s terms remain as they are.

Where the relationship between the two lenders needs to be spelt out in more detail, the parties may sign a deed of priority. We explain ranking, priority amounts and deeds in second mortgage priority and registration.

How long does consent take, and how can you speed it up?

Timing depends entirely on the first lender’s internal process. What you control is how complete the request is when it lands:

1. Have your loan account numbers and the exact names of every borrower.
2. Confirm your first loan is up to date. Arrears slow everything down.
3. Authorise the second lender’s lawyers to contact your lender directly.
4. Keep your phone handy: some lenders call the customer to confirm.

If the business need is urgent and consent will take longer than you have, tell us straight away. There are structures designed for exactly that gap, including a short caveat loan followed by a registered second mortgage once consent arrives. Want to know which fits? Tell us the deadline and the lender and a specialist will map it out.

What if the first lender says no, or doesn’t answer?

A refusal isn’t the end of the road; it just changes the route:

• Caveat loan. Secures the loan by caveat rather than a registered mortgage. Faster, usually for shorter terms, priced for the weaker security. See second mortgage vs caveat loan.
• Full refinance. Replace the first loan entirely with one lender who covers both amounts. Slower but clean. See second mortgage vs refinance.
• Different security. A second property with a friendlier first lender, or no first lender at all.
• Unsecured facility. For trading businesses needing a smaller amount, typically $5,000 to $500,000 sized on turnover.

Illustrative example: consent in a live file

A plumbing business owner needs $180,000 to clear supplier accounts and a quarter’s BAS. The home is worth about $1.1 million, with $520,000 owing to a major bank. The combined LVR after the new loan would sit just under 64%, so the equity works. The loan terms include a standard “no further encumbrance without consent” clause.

The sequence that follows is routine. The owner downloads the latest statement and signs an authority. The second lender’s lawyers send a consent request quoting the account number, the proposed second mortgage amount and a requested priority amount. While the bank processes it, the valuation and document signing run in parallel, so consent is the last piece rather than the first. The figures are illustrative only, and your lender’s timing will be its own, but running the steps side by side is what keeps a consent-dependent file moving.

Does consent affect your credit file or your first loan’s pricing?

Consent is an administrative acknowledgement between lenders. It does not refinance or reprice your existing loan. What does matter is how the first loan has been run: a clean repayment history makes the whole file, including consent, smoother.

Not sure what your first loan allows? Start there

If you’re unsure whether your first mortgage permits a second, that’s precisely the kind of question to put on the enquiry form. It takes about 60 seconds and doesn’t involve a credit check at the enquiry stage.

We don’t forward your details to a string of lenders. One specialist reads them, looks at your first-loan situation and calls to explain the realistic options. Please name your current lender and give the balance accurately; it lets us predict the consent step properly instead of guessing.

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