Quick answer
On Australian Torrens title, registered mortgages generally rank in the order they are registered. The first mortgage is paid first from any sale, the second mortgage next, and you receive what remains. A priority amount or deed of priority can cap how much the first lender claims ahead of the second, which protects the equity the second loan relies on.
Key points
- Registration order sets the default ranking between mortgages.
- A priority amount caps the first lender's claim so redraws can't erode the second lender's cover.
- A deed of priority spells out the ranking and caps in a signed agreement between lenders.
- At a sale or refinance, the lenders are paid in rank order and you receive the balance.
- Default ranking
- Order of registration
- Priority tool
- Priority amount or deed
- Lodgment
- Electronic in most cases
- Paid out
- First, then second, then you
Why does ranking matter so much?
Ranking only matters on a bad day. While the loans are being paid, the two lenders never cross paths. Ranking decides who gets paid first if the property has to be sold to clear the debts, and that single fact shapes almost everything about a second mortgage: the amount, the pricing, the paperwork and the questions the lender asks.
Think of the property’s sale proceeds as water poured into a row of buckets. The first lender’s bucket fills first. Only when it is full does water spill into the second lender’s bucket. Whatever spills over after that is yours. A second lender wants to be very confident its bucket fills too, which is why it only lends when there is a meaningful equity buffer above the combined debt.
How is ranking decided on Torrens title?
Almost all Australian land is held under the Torrens system, where the state register is the record of who owns the land and which interests affect it. As a general rule, registered mortgages rank in the order they are registered. Your first lender registered its mortgage when you bought or refinanced; a new mortgage registered later sits behind it.
Mortgages are lodged using the National Mortgage Form, introduced across the states and territories from 2017, with local addendums for signing and witnessing. Lodgment now happens electronically in most cases. Queensland, for example, has mandated electronic lodgment of the National Mortgage Form since February 2023.
Want to see your own title before you start? Our guide on how to order a title search explains what shows up and where to get one.
What is a priority amount, and why do lenders insist on one?
Many first mortgages are “all monies” mortgages: they secure whatever you owe that lender, now or in future. That’s a problem for a second lender. If you redraw on your first loan or the first lender extends more credit, the first bucket gets bigger and the second lender’s cover shrinks.
A priority amount solves this by capping the first lender’s claim. It’s often set at the current limit plus an allowance for interest and enforcement costs. Anything the first lender advances above that cap ranks behind the second lender.
| Without a priority cap | With a priority cap |
|---|---|
| First lender’s claim can grow through redraws or new advances | First lender’s claim is limited to an agreed figure |
| Second lender’s buffer can shrink after settlement | Second lender’s buffer is protected |
| Second lender prices in more uncertainty | Structure is cleaner and easier to approve |
When is a deed of priority used?
A deed of priority is a signed agreement between the lenders (and usually you) that records the ranking, the priority amounts and how each lender will act in certain events, such as notifying the other of a default. It’s more formal than a consent letter and is more common with larger loans, commercial property and business lenders who already hold security over a company’s assets.
Not every second mortgage needs a deed. Many settle with a simple first mortgagee consent that includes a priority figure. Your lender’s lawyers will say which is needed once they’ve seen the first loan’s terms.
Curious what your own title and first loan would need? Send us the basics and we’ll tell you before anything is signed.
How do caveats fit into the ranking picture?
A caveat is not a mortgage. It is a notice on the title warning that someone claims an interest in the land, and it generally stops other dealings being registered without notice to the caveator. Titles Queensland describes caveats as preserving the status quo on the title while a claim is resolved, and notes that in most cases a caveat lasts somewhere between 14 days and three months unless steps are taken to extend it.
Some short-term lenders secure loans with a caveat instead of registering a mortgage. It can be quick, but it’s a weaker position than a registered second mortgage, which is why caveat loans usually suit short terms. We compare the two in second mortgage vs caveat loan.
What happens to ranking at payout?
When you repay a second mortgage, whether from a sale, a refinance or cash, the second lender issues a payout figure and signs a discharge. The discharge is lodged and the mortgage disappears from the title. If you sell, both lenders are paid in rank order at settlement and the balance goes to you.
Our guide to paying out a second mortgage walks through payout letters, discharge timing and the fees to expect.
Illustrative example: ranking at a sale
Say a commercial property sells for $1,500,000 with $700,000 owing to the first lender and $300,000 to the second. After selling costs, the first lender is repaid in full, then the second lender, and the owner receives what is left. If the sale price were far lower, the second lender would be the one exposed, which is exactly why it measures the buffer so carefully before lending. The figures are for illustration only.
Want the ranking handled properly from day one?
Ranking, consent and priority caps sound technical, but they’re routine for a specialist. The owner’s job is simply to give accurate facts: who owns the property, who the first lender is and what is owed.
Enquiring takes about a minute and doesn’t involve a credit check. One specialist reviews it rather than a queue of lenders, and they’ll call you to explain how your particular title would be structured. Accurate answers on the form let us spot a priority or consent issue before it becomes a delay.
Frequently asked questions
Does a second mortgage appear on the title search?
Yes. Once registered, it appears on the title as a mortgage in favour of the second lender, listed after the first mortgage. It is removed when the loan is repaid and a discharge is registered.
Can a second lender ever rank ahead of the first?
Only if the first lender agrees in writing, usually in a deed of priority. In a normal second mortgage, the first lender keeps first ranking.
What is a priority notice?
Some states allow a priority notice to be lodged ahead of settlement to protect an upcoming dealing from being overtaken by another registration. Queensland lists priority notice instruments among those lodged electronically.
What happens if the first lender enforces its mortgage?
The first lender is repaid first from any sale proceeds. The second lender is repaid from what remains. That is why second lenders care so much about combined LVR and the first loan's repayment history.